UK businesses have had plenty to cope with over the last 20 months or so. Hammered by COVID-19, hit by a skills shortage and coping with sometimes patchy supply chains.

So, it’s even more important that they have robust measures in place to tackle fraud.

Fraud is simply the intent or the act of misrepresentation – scammers lying about themselves or their actions and services – to cause a gain or loss.

Due diligence, internet controls and risk management can often be overlooked and seem expensive or hard work.

However, according to the Metropolitan Police, this perception often leaves SMEs particularly vulnerable to fraud. With many owners and managers unaware of the risks their businesses face.

Fraud can come from anywhere, including:

• Staff members
• Customers
• Suppliers
• Third parties, unconnected to the business.

To assist businesses, here are some tips to prevent business fraud:

Be sceptical

If it sounds too good to be true, it probably is. Thoroughly question all deals, opportunities, documents, transactions and information.

Have a thorough understanding of your business, including:

• How it operates
• The staff you employ
• The products and services it provides
• Your target market and your business
• Your legal and regulatory obligations.

Know your customers and suppliers

When you understand who you do business with, you can spot any business requests or transactions that look fraudulent.

Conduct due diligence, such as checking the customer or supplier details you have on file, as well as online searches.

Identify your vulnerabilities

Imagine how a fraudster might target your business and test the systems you already use to reduce risk. Make sure you and your staff know those systems and regularly review them.

Train your team

Fraudsters will try to target your team, often trying to obtain information via email, phone calls or even in person.

You should train them to spot the signs of fraud and teach them to be cautious of unexpected emails or calls, especially those that purport to be from banks or public agencies, such as HMRC.

Develop a strategy and talk about fraud

Create a fraud prevention and detection strategy for your business. It should detail controls and procedures. Talk about fraud with your staff, suppliers and other contacts.

Take extra care against cyber attacks

With increasing threats from cybercrime, protect your business technology against attacks.

Make sure you back up your systems in case they go wrong or are attacked.

Invest in programmes and services that help to deter or prevent fraudsters from committing fraud.

Understand how money leaves your business, including:

• Methods of payment
• Who has the authority to make those payments?
• Who checks payments are legitimate?

Secure and protect your property

This includes laptops, computers, smartphones and intellectual property.

Factor in business insurance to cover these items if they’re compromised or stolen.

Develop an action plan

Consider when you might need professional or legal advice.

While prevention is better than cure, you and your business need to prepare for the worst. Having an action plan in place will help limit your losses to fraud.

Always report fraud and get help

Action Fraud is the UK’s national fraud and cybercrime reporting centre or you can also report fraud to the police.

If you receive suspicious communications from HMRC or other public agencies make sure you report them as well. HMRC has a dedicated fraud service found here.

If you have to submit a Self-Assessment tax return to HM Revenue & Customs (HMRC), you only have a few weeks left to submit it online.

The clock is ticking on the 31 January 2022 online tax return deadline – miss it, and you could face fines.

The 2020/21 tax return covers earnings and payments during the pandemic, including any taxable grants or payments from COVID-19 support schemes up to 5 April 2021.

To help you get your return in on time, here is some advice:

Don’t leave it until the last minute

You’re more likely to make mistakes or miss out important information if you leave it too late.

Anecdotal evidence also suggests that tax returns submitted just before the deadline are more likely to be subject to HMRC enquiries and investigations.

Save time, be prepared

When the tax year ends on 5 April, you can start getting prepared for submitting your tax return right away. If you collect information throughout the year and stay on top of your bookkeeping, you’ll save valuable time when it comes to filling in your tax return. Plus, if you do need to get in touch with HMRC, you’ll avoid the last-minute rush in January.

Organisation is key

Make sure all of your paperwork and details are prepared ahead of time, including:

• Unique Taxpayer Reference (UTR) number (you need to register for one if you’ve not completed a Self-Assessment tax return before)
• National Insurance number
• Details of all your income; for example, if you also have rental income or have earned bank/building society interest, or have received dividend payments
• Records of relevant business expenses.

File online

If you are still using a paper return now is a great time to switch. Registering to file online makes it easier to upload all the information that HMRC needs from you. You don’t need to do it all in one go – simply save your form and fill it in when you have the time.

Keep track of income and expenses

Keep accurate records of income and what you’ve claimed as business expenses throughout the tax year so that you’re ready to go, including:

• Bank statements
• Chequebooks and paying-in slips
• Credit card statements
• Sales invoices/till rolls
• Job quotes or estimates
• Purchase invoices and expense receipts
• Payroll records
• VAT records.

This information will make completing your return much easier.

Sick of paper records? Have you considered cloud accounting?

Taking your record-keeping online could help to cut back on the paperwork you have to retain and automate many bookkeeping processes.

Budget in advance

Once you’ve submitted your return, you can manage any surprises within your tax bill by budgeting in advance and getting ahead if you need to make any payments on account.

Get help

If you don’t fancy going it alone, why not hand the hard work to us. Every year we produce hundreds of tax returns for clients.

If you need help, don’t delay. Get your Self-Assessment information over to us today.

Many small and medium-sized enterprises (SMEs) were hit hardest at the beginning of the pandemic.

They had access to support, like the Bounce Back Loan, which was easier to access and had lower interest rates, but those only helped during the short term.

Now a growing number of SMEs are struggling with debt. The latest Bank of England Credit Conditions Survey shows that the majority of banks (44 per cent) reported an increase in loan defaults by small companies in the third quarter of this year.

This is twice the levels seen during the height of the pandemic.

There are options for businesses that have got into a debt spiral, including:

Deal with priority debts first, including:

• Business rates
• Utility bills
• Mortgage and rent payments
• Outstanding tax payments
• Payments to strategic suppliers
• Bank loans
• Any form of borrowing with a personal guarantee

Consolidate or refinance loans

It may make sense to consolidate several loans into a single payment or refinance an existing loan.

With inflation increasing, businesses should take advantage of the historically low interest rates that currently exist.

You should seek independent advice before doing anything around consolidating or refinancing loans.

Tackle late-paying customers

Late payments are the bane of most small businesses. Despite Government efforts to tackle this issue, it continues to be a problem for many.

Challenging customers about their debts can be difficult. However, businesses should strengthen their credit control processes so they are paid on time.

Focus on cash flow

Cash flow is the lifeblood of your business and there are some simple measures you can put in place to help keep it healthy.

For example:

• Improve your process for chasing up debtors
• Agree on payment terms in advance
• Lease rather than buy equipment or vehicles
• Review and reduce business costs.

Boost your revenue

As well as cutting costs, you can also tackle a cash flow crisis and pay off your debts by improving your turnover.

This can be achieved by:

• Increasing leads to attract more customers
• Raising your prices
• Finding more ways to cross-sell or upsell your services or products
• Engage your staff and seek their input. They may well have ideas that are well worth putting into action.

Managing your income and cash flow can be challenging so seeking professional advice and insights could pay dividends.

Avoid debt in favour of other forms of finance

You could explore the following:

• Liquidating assets – Creditors may gain more than if a business is wound-up.
• Look for new investors – Can you generate income through the sale of shares? Have you considered the tax-efficient Enterprise Investment Scheme?
• Peer-to-peer lending or equity crowdfunding – These alternative forms of finance are great for businesses that can’t obtain traditional finance.
• Invoice financing – If you have a large number of late payments, you could finance the invoices and get paid sooner.
• Borrowing from friends or family – Beware, this can put a strain on relationships.

Make sure you’re getting fair treatment from lenders

You’re entitled to be treated fairly by your bank or building society.

The Lending Standards Board operates as an independent body (albeit one funded by its registered financial firms), with an independent board made up of non-executive directors.

Link: Small business loan defaults rise substantially

Cost-saving will be key for many businesses struggling to get back up to speed after the pandemic.

Many small and medium-sized enterprises (SMEs) were hit hard and now face higher inflation, skills shortages and rising wages.

The Bank of England says the inflation figure could even hit four per cent by December. So, cutting costs can help get thousands of UK firms through these challenging times.

There are many options for businesses to cut costs, including:

Review your suppliers

Make sure you are getting the best value for money. Get a minimum of three quotes for your supplies, particularly in areas like communication, where there are often better deals to be had.

You should also give existing suppliers the chance to review their prices.

Your business is important to them, but don’t be afraid to walk away for a better deal.

Innovate

Sometimes to you need to spend a little to save a lot. If you are operating on older systems or software, it may make sense to upgrade now so that you are more efficient as a business.

An example of this is digital invoicing and bill payments. These techniques could help to reduce administration costs and postage, while also helping you to avoid piles of paperwork – saving you time and money.

Many of the latest cloud accounting platforms allow you to digitise these processes, while also offering you many other benefits, including the option to go paperless.

Assess your workspaces

The requirements for your business premises may have changed during the last year, especially if many of your staff have moved to hybrid or remote working.

Assess whether your current commercial property still meets your needs or whether there could be cheaper alternatives elsewhere.

If you have moved entirely to remote working, you could do away with business premises altogether.

Go second-hand

Quite often refurbished equipment can perform just as well as new and allow for considerable savings. This does not just apply to office furniture.

Properly refurbished computer equipment can also result in big savings as can equipment like copiers.

Be aware, some capital allowance tax schemes won’t allow claims made on second-hand machinery or equipment.

Use an accountant

It may seem obvious, but using our expertise could help you cut your costs considerably.

We can look through your books and spot cost-saving opportunities that you may have missed and make a detailed analysis of the day-to-day running costs of your business.

We can also help you find reliefs and allowances that help you reduce the costs you already have by offsetting them against tax.

If you are struggling with a cost crisis, act now. Cash flow issues are one of the most common reasons for business failure.

The last month has highlighted the challenges that many businesses face when it comes to supplies and costs.

Visions of people filling up plastic bottles with petrol or pulling trolleys of toilet rolls to their car may seem bizarre but they have become reality in the last year and this shortage of key supplies is affecting businesses.

Companies already face several problems as they struggle to get back up to speed following the COVID-19 lockdowns.

A shortage of supplies and skilled labour is another challenge that may prevent growth and risk their viability.

Of course, the media crying out for panic buying doesn’t help and neither does messages about a ‘black Christmas’ but these concerns are based on reality.

While we still face potential disruptions from the pandemic, the main issue at this time seems to be the growing shortage of deliveries due to issues with supplies of certain components and a nationwide driver shortage. This was typified in the panic buying seen at many forecourts.

The UK is facing many difficult issues at the moment, supplies and drivers being just two. Businesses must also contend with steadily rising energy prices and growing inflation.

To fix part of this issue, the Government has plans for temporary visas for 5,000 foreign lorry drivers but the British Chamber of Commerce (BCC) has described this measure as ‘a thimble of water to put out a bonfire.’

Last month more than a million vacancies were reported. The good news for many workers was that wages are rising, but the downside is that it creates inflationary pressures which in turn affect prices.

What next? 

The current crisis all amounts to rising costs for businesses, which must adapt to new circumstances. Given this new period of uncertainty businesses should:

• Plan for future fuel shortages
• Assess their gas and electricity prices and seek out better tariffs
• Build a strategy for taking on staff as well as retaining key workers
• Seek out new suppliers that can provide the materials and services needed
• Outsource business functions to reduce costs and the reliance on certain skills
• Consider how rising supplier costs will affect their end product prices and underlying profits and investments.

For example, prolonged fuel shortages could be alleviated by turning to electricity, particularly if you have a fleet of vehicles.

Why act now?

Crisis planning may seem like something that can be kicked down the road but eventually, that road runs out, by which point it is too late to act.

While many larger firms have contingency plans in place, for many small businesses they can be seen as an unnecessary additional cost.

However, regularly reviewing the costs within your business and creating a crisis strategy are both essential steps in building greater resilience. With an uncertain future ahead of us, now is the time to take action. If you have any questions, please get in touch with us.

Lots of businesses are seeking out finance at the moment, whether to fund an acquisition or finance investment, but given the challenges the economy faces, it is becoming increasingly difficult to secure the right deal.

If a business hasn’t sought out finance for a while or there has been a significant change to their operations since they last requested funding, then there are a few steps they should consider to improve their chances of success.

Review your business plan

A business plan is often one of the first documents that a potential lender and/or investor will want to see, as it lays out your vision for the company.

Having an up-to-date business plan will show financiers that you have a path to profitability and growth, giving them the confidence to invest or lend you the money you require.

If you haven’t reviewed your business plan in a while, take the time to review it and update it, highlighting potential future risks, as well as opportunities.

Investors or lenders will appreciate transparency as it makes it easier to calculate the benefits and disadvantages of a deal.

Get the figures to back you up

As well as having an effective business plan, businesses will need to be able to demonstrate that they can service the debts of any loans that they make or offer the right level of return to investors.

A key aspect of this is demonstrating financial health and positive cash flow. Although not essential, it is highly recommended that you produce detailed management accounts in the months leading up to seeking finance.

This should demonstrate profitability, cash flow, debts and sales. Doing this for several months will give a lender or investor confidence that the business is stable.

Be realistic

If you are borrowing for a specific reason, such as investment in a particular piece of equipment or to hire a certain type of employee, borrow as much or a little more than you need.

Lenders will want to check the value of the investment you are financing and may be concerned if you borrow too little or far too much.

Both may indicate that you are taking on too much additional risk, which could affect your ability to repay them.

Prepare for due diligence

At some point during the lending or investment process, the other party will want to conduct financial and legal due diligence.

It is unfortunately fairly common for deals to fall through at this late stage because a detail has been missed.

Remember, lenders and investors tend to be risk-averse. If they feel that something uncovered during due diligence should have been revealed to them earlier it can put them off entirely.

Try to be as open as possible early on and you should avoid any complications during this stage that may prevent you from obtaining the finance you need.

Try alternative finance

If you can’t get a loan from a traditional lender or you are struggling to find investors that will finance you, then you may want to consider an alternative form of funding.

There are a growing number of alternative finance options out there to help. If you need money in the short term, for example, you could use invoice finance.

This allows a lender to effectively ‘purchase’ your unpaid invoices for a fee. Then when the invoice is paid by the customer, you get the remaining balance minus the fee.

If you need to borrow a larger sum then you could borrow against your existing assets or property owned by the business. This could help you secure a larger sum over a longer period but may put the assets you own at risk.

Finally, there is crowdfunding and peer-to-peer lending. This approach allows businesses to seek finance with several individuals, often online.

Typically, investors will be offered a small percentage of equity in the company in the case of crowdfunding or will see numerous lenders loaning money and earning interest on repayments.

This allows investors and lenders to share the risk, which makes it easier for them to lend the money.

Seek help

Possibly one of the most important steps you can take is to seek corporate finance advice from an experienced expert. They can help you to find the best deal and assist you with preparing the information that lenders and investors need – brokering the best outcomes for you and your business.

If you would like advice on securing finance, please contact us and arrange a consultation with our corporate finance team, 

Have you ever considered buying a business?

Whether you are an experienced entrepreneur or just starting out, acquiring a ‘ready-made’ business offers many advantages.

For established businesses, buying a second company can help them break into new markets or acquire machinery, skilled workers or innovations that can help their operations grow.

Meanwhile, new entrepreneurs can acquire a turn-key business that requires minimal work to start generating profits. 

However, the process of buying a business is not without risks, especially at the deal-making stage, so we have put together some quick tips to help. 

Research, research, research 

Before even approaching another business do as much background research as you can.

Find out exactly who owns it, look into its previous accounts, speak to its suppliers – don’t be afraid to ask questions.

Once you make that initial contact with a seller you will need to obtain as much information as you can from them.

Check to see whether they have recent management accounts you can check and find out if the company has any debts or obligations that could create risk.

Some owners may be selling for retirement, others may think that a new owner could help the business grow, while some may have concerns about the business and are seeking a quick exit. Learning more about the reasons for a sale could alert you to issues within the business.

Be open, be honest 

Try and be as transparent as possible with a seller as it encourages them to be honest and open with you as a buyer. Trust is important when securing a deal, as both parties face risk during a transaction.

You should also be honest with yourself and ask whether the deal is suited to your needs and whether any issues can be feasibly fixed.

It sounds a bit cliched but make decisions with your head, not your heart. If you are unsure, why not ask a trusted friend or adviser for their independent opinion? 

Check suitability 

Not every business is going to be suited to your goals. Several factors can be difficult to identify at first, but once you open up a dialogue with a seller, you should check:

• Sales revenue or cash flow
• Its ability to be relocated
• Debts and obligations
• Ownership of property and assets
• Rights to patents and intellectual property
• The existing management team. 

Draw up heads of terms 

If you are serious about purchasing a business create a heads of terms agreement. This should set out the points that have been agreed in principle between parties during negotiations.

Heads of terms provide serious intent and have moral force, but do not legally bind the parties to conclude the deal on those terms or even at all.

Despite this, they are a great first step in setting out the intended purpose of the transaction and the aims of each party. 

Make sure you have access to sufficient finance 

Once the basic terms of the sale have been agreed you will need to ensure that you have sufficient funding to cover the costs of the transaction.

Few business owners fund the whole of a sale out of their existing personal or business funds.

Instead, many seek out a loan or investment that allows them to access the funds they need.

Of course, this requires lenders and/or investors to sign off the investment in the new business, which can be challenging and take time.

Most lenders and investors will not only want to know about your financial position but they will also want to know more about the health of the business you are buying so that their money isn’t at risk.

Entrepreneurs should factor this process into the timeline for their transaction and ensure they have the funds they need to complete it. 

Don’t be afraid to walk away at any stage 

Possibly one of the most important tips is to walk away if the deal isn’t right. Transactions have been known to fail at the last second, perhaps after due diligence uncovers an unexpected issue.

By this stage, both the buyer and seller may be emotionally and financially committed to the deal but that doesn’t mean that it has to go ahead.

Until a final contract is signed and funds are transferred a deal can always be cancelled or, in some cases, renegotiated.

Signing up to a deal that leaves you, your existing business and finances at risk is rarely worth it.

Ask for help 

If you haven’t bought a business before, or even if you are an experienced entrepreneur, it pays to seek out help from a professional.

Working with an accountant can help you to structure a better deal, acquire finance and identify potential risks. If you are looking to acquire a company or want advice to grow your business, our advisors can help you today.

Unincorporated businesses have heaved a sigh of relief after the Government delayed the date for the implementation of Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) by one year to 2024.

Hit hard by the pandemic, it will give these businesses, including the self-employed and landlords, an extra 12 months of breathing space to prepare for the changes.

What are the changes? 

The self-employed and landlords with a gross income from their business or property of more than £10,000 per annum will need to follow the MTD for ITSA rules from 6 April 2024.

It will not be necessary for general partnerships to join MTD for ITSA until the tax year beginning 6 April 2025, while the date other types of partnerships will be required to join is yet to be confirmed.

The Government introduced a more favourable system of penalties for the late filing and late payment of tax for ITSA in March 2021.

This penalty scheme is for those who are required to comply with MTD for ITSA and will now also come into force in the tax year beginning April 2024 for the self-employed and landlords, and April 2025 for all other ITSA taxpayers.

There will be the chance to explore the benefits and challenges of MTD early if you are an eligible business or landlord, via the Government’s pilot scheme.

This is already underway and will be increasingly expanded during the 2022/23 tax year, preparing for a greater scale of testing in the 2023/24 tax year.

How can you prepare for these changes? 

It’s vital that businesses use the correct software to meet the new requirements, such as HMRC approved cloud accounting software or a set of compatible software programs that can connect to HMRC systems via its Application Programming Interface (API).

The software must be able to:

• Keep records in a digital form
• Preserve digital records in a digital form
• Create a VAT or tax return from the digital records held in functional compatible software and provide HMRC with this information digitally
• Provide HMRC with VAT and tax data voluntarily
• Receive information from HMRC via the API platform that the business has complied.

Will you be ready? 

MTD for income tax is the first step in HMRC’s shift towards an innovative, digital tax service, supporting businesses through their journey in the ever-evolving modern world.

Although the initiative has been postponed by a year, taxpayers must be fully prepared, as they could face fines or penalties if they do not abide by these changes.

It is important that they implement suitable software, such as an HMRC-approved cloud accounting solution, and migrate their information across to the new systems in advance of the new deadline.

This may require additional training and changes to existing accounting processes and procedures. If you have any questions, then get in touch with Faye Thompson today.

Link: Businesses get more time to prepare for digital tax changes

The Coronavirus Job Retention Scheme (CJRS) ended in September, but many firms could still be subject to a CJRS compliance check in the weeks and months ahead.

HM Revenue & Customs (HMRC) has been sending out letters to employers throughout the year telling them they need to pay back CJRS payments because they claimed too much or are suspected of furlough fraud.

What is a compliance check?

In addition to checking CJRS payments, HMRC could write or phone to say they want to check:

• Any taxes you pay
• Accounts and tax calculations you have submitted
• Your Self-Assessment tax return
• Your company tax and VAT returns
• PAYE records and returns, if you employ people.

These compliance checks can even be sent at random where there is no suspicion of illegal or inappropriate activity.

How does HMRC determine CJRS fraud? 

HMRC classes furlough fraud as:

• Not paying employees the full amount they are entitled to
• Employers claiming furlough payments for workers who are still working for them
• Claiming payments for non-existent employees
• Not telling staff they are furloughed, who only find out when they receive their wages
• Backdated claims that include periods in which the employee was working.

What if my firm was not entitled to payments?

HMRC can claw back any money paid out which the employer was not entitled to via a 100 per cent income tax charge whether the claim was made innocently or deliberately. This includes overpayments of a CJRS grant due to errors.

The compliance check will request details of staff members and how much money they received while furloughed. HMRC will typically give a short timescale to provide this information – usually around 30 days.

HMRC will write to tell you the results of the check. You will then be:

• Told no additional tax is due;
• Repaid if you’ve paid too much tax – you may also get interest on the amount you’re owed; or
• Asked to pay additional tax within 30 days if you owe more ­– you’ll normally have to pay interest from the date the tax was due.

You may also have to pay a penalty. When issuing fines HMRC will look at:

• The reasons why you underpaid or overclaimed the tax
• Whether you told HMRC as soon as you could
• How helpful you’ve been during the check.

If you have problems paying, you should tell HMRC immediately, as it may be possible to arrange a time to pay arrangement.

If I am penalised, how much will I pay?

The penalty percentage will fall within a range and depends on the type of behaviour and whether the disclosure was unprompted or prompted. They fall broadly into three categories:

• Deliberate
• Non-deliberate
• Deliberate and concealed or treated as deliberate and concealed

Each carries a different penalty, which can be seen here.

If you do get a letter or phone call about a CJRS compliance check then you should seek immediate assistance from your accountant. We are happy to help answer your queries, so please get in touch.

Link: Flood of HMRC fraud enquiries expected as furlough finishes