Extension of Government funding schemes

Extension of Government funding schemes

Government funding became a lifeline for many business-owners during COVID-19. However, even beyond times of economic crises, Government schemes and funding initiatives remain an important source of support for SMEs and growing businesses.

In recent weeks, HM Revenue & Customs (HMRC) has confirmed the extension of both the Recovery Loan Scheme (RLS) and the Help to Grow: Digital Scheme.

Recovery Loan Scheme

HMRC launched the Recovery Loan Scheme in April 2021 and has now extended it for a further two years.

It’s hoped that this will bring comfort to UK businesses who are still facing challenges as a result of the pandemic, drive growth, create jobs and stimulate the economy.

The Government have agreed to continue to provide funds via the RLS, providing loans up to £2m, in much the same way as before.

The Government will underwrite 70% of lender liabilities, at the individual borrower level, in return for a lender fee.

Lenders must pass the benefits of this guarantee on to applicants.

However, recognising that businesses – generally speaking – are now in a better position than they were during the pandemic, lenders may require a personal guarantee from the borrower, in line with standard commercial practice.

Help to Grow: Digital Scheme

The Help to Grow: Digital scheme is all about helping UK businesses to adopt technology. Doing so facilitates competition and can improve profitability.

The scheme was previously open to businesses with over 5 employees, providing discounts worth up to £5,000 on approved software.

Now, the scheme is open to businesses with between 1-249 employees, meaning many hundreds of thousands more stand to benefit.

In addition, e-Commerce software will now also be available under the scheme.

A full list of the eligibility criteria for the Help to Grow: Digital scheme can be found on GOV.UK, here.

How can George Hay help?

We support hundreds of businesses, across Cambridgeshire, Hertfordshire, Bedfordshire and throughout the UK, just like yours.

Our advisers can help you to determine your eligibility for funding, if this is something you are unsure about. In addition, we can assist you with the provision of supporting documentation for your application, if required.

To discuss your requirements with us in more detail, contact us today.

Capital Gains: Separation and transfer of assets

Capital Gains: Separation and transfer of assets

For separating or divorcing spouses, HM Revenue & Customs (HMRC) has announced important changes to Capital Gains Tax rules relating to transfer of assets.

Currently, assets transferred between cohabiting spouses and civil partners are subject to “no gain or no loss” treatment. The treatment applies in any tax year in which they are living together. This treatment postpones gains or losses until the spouse or civil partner in receipt of the asset disposes of it.

The cost of acquisition is deemed to be the same as when the transferrer originally purchased the asset.

Where a marriage or civil partnership has broken down, the benefit of no gain no, no loss treatment only lasts until the end of the tax year in which the two parties permanently part ways.

In a review of CGT, the Office of Tax Simplification (OTS) recommended fairer treatment of divorcing or separating couples disposing of transferred assets.

Extension of ‘no gain, no loss’ treatment

No gain, no loss treatment will be extended for disposals occurring on or after 6 April 2023. The extension will allow for the transfer of assets for up to three years after the couple stop living together.

In particular, those experiencing protracted and complex divorce proceedings, involving the distribution of assets, stand to benefit.

The Finance Bill 2022-23 also includes the following proposed revisions:

  • Assets involved in a divorce agreement will be subject to no gain, no loss treatment for an unlimited time,
  • a spouse/civil partner retaining an interest in the former matrimonial home can claim Private Residence Relief (PRR) when the home is sold; and,
  • where interest in the former matrimonial home is transferred to the ex-spouse or civil partner, and the transferrer is entitled to receive a percentage of the proceeds when that home is sold, the same tax treatment that applied on transfer will apply to the proceeds of the sale.
Example

The latest announcement stands to benefit those separating couples making disposals on or after 6 April 2023. However, for those separating in January 2023 the no gain, no loss treatment will end 5 April 2023.

How can George Hay help?

Capital Gains Tax often involves sizeable sums of money; undertaking careful tax planning can help you to minimise your liabilities. However, tax planning requires an understanding of current tax policy and how it applies to your circumstances. We can explain existing legislation, and help you understand the impact of any disposal of assets on your liabilities.

To discuss your circumstances in more detail, with our tax advisers in Cambs, Beds or Herts, contact us today.

Link: Capital Gains Tax: Separation and divorce

VAT efficiency for cost-sensitive SMEs

VAT efficiency for cost-sensitive SMEs

The ‘charge and claim’ cycle associated with Value Added Tax (VAT) often becomes a routine part of running a business but, with VAT contributing significantly to Government’s annual tax receipts, opportunities to improve VAT efficiency should not be overlooked.

Cash accounting for SMEs

The cash accounting scheme can be advantageous for small businesses. It relies upon monies in and out as opposed to invoices sent and received. Consequently, output tax only becomes due when the sales invoice/s in question are paid.

Businesses with a turnover not exceeding £1.35 million, that are up to date with VAT returns and payments, can opt to use cash accounting. However, it is not suitable for every business.

Professional advice should be sought if cash accounting is something you are considering.

Renting business premises?

If a commercial landlord opted to tax their interest in a building that they now let out to you, VAT will be due on your rental payments. This is true regardless of your VAT registration status.

It may be possible to have a conversation with your landlord about their ‘opting to tax’. In particular, you may want to find out how long this has been in place for.

An election can be revoked if made more than 20 years ago. Any rent they receive from you will be VAT exempt from that point onwards.

Postponed VAT accounting for imports

If you import goods from outside of the UK, postponed VAT accounting means no input tax is payable on arrival.

The importing entity, instead, accounts for any VAT due on imports as part of the return covering the accounting period within which the goods were imported.

Essentially, businesses can defer payment and avoid any immediate adverse impact that importing goods might have on their cash flow.

VAT deregistration – is it feasible?

If you are currently registered but know that your turnover is, for whatever reason, likely to consistently fall below the VAT registration threshold (£85,000) going forward, you may want to consider deregistering.

However, it is important to understand the wider implications such as loss of input tax and how this interacts with your current pricing strategy.

Whether registering or deregistering for VAT, this is definitely a conversation you should have with your accountant.

VAT advice from trusted accountants

As trusted tax advisers and chartered accountants, we recognise the importance of keeping VAT matters under review. We want our clients to be VAT-efficient, just as we champion efficiency in respect of many other taxes.

From knowing when to register and deregister for VAT, to utilising the appropriate VAT schemes, you can count on us to keep you informed and operating compliantly.

To talk to one of our professional team of experts, contact us at our Cambridgeshire, Bedfordshire, or Hertfordshire office.

3 tips for choosing cloud accounting software

3 tips for choosing cloud accounting software

Cloud accounting software is not something that can easily be ignored by any business wanting to grow and succeed in the modern world.

The benefits of embracing digitisation are extensive, the choice you have at your fingertips equally as vast, and the reliance upon these systems increasing all the time.

As Making Tax Digital for Income Tax (MTD ITSA) draws closer, a new cohort of taxpayers are faced with making decisions about which tools and software they are going to use.

Choosing a cloud solution; as easy as 1, 2, 3…

With this in mind, we are going to offer up a few snippets of advice for you to consider when it comes to choosing a cloud accounting solution.

Understand what your business needs from cloud accounting software

Too few businesses start out on their journey to embrace digital, without  understanding what they want or need from software.

Consider the everyday ‘pain points’ you’ve been battling with; the administrative tasks that eat up your time; compliance, and what your objectives are beyond compliance. These are the things that should inform your choice.

Whatever solution you eventually put in place, should be a help to you and not a hindrance.

As your circumstances change, the way you use your software and what you need out of it may change too. You should make time to regularly assess whether your existing arrangements are meeting your current needs.

Where you feel your needs are not being met, the rate at which apps, technology and software are being developed means you’ll rarely be in a position where there isn’t a suitable alternative to consider.

Know what’s available

Whilst the sheer volume of choice can be daunting, it’s worth taking an interest in what is available to you and, perhaps, what others in a similar position to yourself are using. Ask around, seek recommendations, and do your research!

Talk to your accountant

Talk to us, as your advisers, about your options; whether you’re just getting started with cloud accounting software or if you are considering a change. First and foremost, we can help you to clarify your needs and objectives. We’ll then use our knowledge of software, features and add-ons that have worked for other clients to identify the best solution for you.

The software you choose should work for you, and for your accountant; enabling you to collaborate effectively and aiding your adviser in their work.

How can George Hay help?

Our cloud accounting experts in Cambridgeshire, Bedfordshire and Hertfordshire are here to help you explore what works for your business. We will always do our utmost to ensure that you’re getting the most out of your chosen software.

To speak to one of our experts about choosing the right software for your business, contact us today.

Why is a shareholders’ agreement so important?

Why is a shareholders’ agreement so important?

Where there are multiple shareholders in a limited company it is important to formalise the working arrangements in respect of the business, and to plan for all eventualities. Creating a shareholders’ agreement is a good way to do this.

Although all shareholders should be pulling in the same direction and acting in the best interests of the company, there are times when this does not happen. The reasons for this being the case can differ greatly.

Many of the day-to-day operational decisions that arise as a result of running a company, including the payment of dividends, can be approved by the directors. Some other decisions require shareholder approval.

Some resolutions just need a majority of more than 50%. Certain, more significant decisions require 75% or even 90% to pass. This can, clearly, lead to issues where there are several shareholders involved.

Whilst a shareholders agreement is not going to direct how someone may vote for any given resolution, what it will do is aid in situations where there is an impasse or fundamental disagreement over matters.

To summarise, a shareholders’ agreement is entered into between all of the shareholders in a company, to regulate how the shareholders must act and react in certain scenarios.

What to address in any shareholder agreement

Whilst any Shareholders Agreement has certain standard elements, each situation is different to the next and so it’s difficult to provide a comprehensive list of topics to address. Below are some key areas that we hope will act as a starting point for any shareholders thinking about putting an arrangement in place.

  • Transfer of Shares – a restriction on a shareholder transferring their shares to another party
  • Sales of Shares – an agreed valuation basis, should a shareholder wish to exit the business
  • Restrictive covenants – limiting a shareholders business activities whilst being an existing member and post exiting
  • Events of Default – What happens to a shareholders shares in the event of death, divorce, bankruptcy etc.?

A well drafted shareholders agreement is worthwhile for any limited company with more than one shareholder. You hope it is not needed, but it is vitally important if things do go wrong.

As professional advisers we have often heard “we’ve known each other for years” and that no agreement is necessary. However, circumstances change and even the best of friends can fall out when business is involved.

Example

A working director owns 50% of the shares in a company. The shareholder unexpectedly passes away and leaves his shares to his spouse. The spouse is now a 50% shareholder of the company and involved in all shareholder decisions. They also have full entitlement to any dividends paid. The absence of a Shareholders Agreement means the remaining shareholders have no right to buy them back. They are also unable to decide how these shares would be valued if the spouse elected to sell.

How can George Hay help?

Please speak to us if you need help with planning for a shareholders agreement, especially where there are several shareholders, where the company has borrowed money from a shareholder or where there are concerns about imminent changes to usual proceedings.

We can assist with share and company valuations and with documenting shareholders wishes, working alongside your chosen solicitor.

Conversations to have with your accountant

Conversations to have with your accountant

Why do you do what you do, as a freelancer or a business owner? This is an important question to ask yourself regularly; it can help to bring the ‘bigger picture’ back into focus when the routine running of your business begins to rule.

There may be any number of reasons that you took those initial steps to turn your enterprising idea into a reality but it’s likely that you share a common ambition with others who have done or are thinking of doing the same. To build something from the ground up that you are proud of, and to succeed.

Small business owners and freelancers, in particular, sometimes ask us the question ‘Do I really need an accountant?’. For us, as chartered accountants and business advisers, the important point to make is that a good accountant does not just understand ‘where you are’, but also ‘where you want to be’. We take care of number crunching and compliance, true, but we also do so much more than that.

We have been with many of our clients since they were fledgling businesses and seen them develop into established organisations. As a result, we have always been strong advocates of the importance of having the right advisory partner on board early on in your journey, to challenge you, to be a sounding board, to help you strategize and to be perceptive of your needs.

If you are at the helm of a business poised for growth, are you having the right conversations with your accountant?

 

Talking to your accountant

 

  • Digital tools and cloud accounting

If you are a business, regardless of size, or within scope of self-assessment, Making Tax Digital will impact you. HMRC’s master plan is to digitalise the UK tax system, and it follows that digital tools and cloud accounting will enable you to keep up and comply. More than that, though, cloud accounting software, apps and digital tools can help you to make efficiencies across your business, to work smarter and to streamline your processes so you can reclaim precious hours in the day.

 

  • Employing more staff, or first-time employer?

As a growing business, you may need to employ staff for the first time or add to your existing workforce. Being an employer brings with it serious responsibilities and legal obligations; from paying the correct wage rates, to ensuring you have an auto-enrolment compliant pension scheme in place. If you fall foul of legislation, the consequences are significant. You should consider how you will effectively manage your payroll and perhaps whether outsourcing could be a solution.

 

  • Have you selected the right structure for your business?

Sole trader? Limited company? Partnership? How you choose to structure your business is an important consideration. Which you opt for depends on your circumstances, your objectives and existing tax thresholds; not only will it differ person to person, but also as thresholds shift. Seek advice, if you’re unsure, as it is not something that can be easily changed.

 

  • The importance of timely management accounts and financial forecasting

Are you drawing useful insight about your business from timely, bespoke management accounts? Well put together management accounts, which pull together real-time, high-quality data to paint a picture of your business’s performance, can be a vital business tool when combined with hands-on advisory and analytical input.

 

  • Innovation and futureproofing

Innovation, creativity and taking steps to futureproof your business should be prioritised as much as cash flow and profitability, if growth is your aim. Look to your adviser for an objective and honest perspective on new ideas; we pride ourselves on listening to our clients, understanding them as people (as well as their business) and formulating realistic business plans and growth strategies, based on what we learn.

 

At George Hay we pride ourselves on an ability to tune into our client’s needs. We question intuitively, listen carefully and give considered, pragmatic and tailored guidance that achieves results.

Our range of accountancy and business advisory services are delivered by a team of friendly and professional chartered accountants and business advisers from offices in Hertfordshire, Bedfordshire, Cambridgeshire, but we work with businesses throughout the UK. If you’d like to find out more about how we could support you, contact us today.

Non-domicile or non-sense

Non-domicile or non-sense

Once again, tax has been making the news with the Chancellor’s wife, Akshata Murty, dominating headlines as a result of her non-domicile status.

The quality of the reporting I have come across on this topic, so far, has been poor and shows a distinct lack of understanding of the tax system. Whatever your views on non-domicile tax laws, it is absolutely not what Kier Starmer, and Angela Rayner have called a ‘scheme’.

Domicile is difficult to explain; it has nothing to do with a person’s residency, so where a person lives does not determine domicile. Your domicile is, effectively, where your DNA belongs. Which country do you consider as home? With which country do you naturally affiliate with? Where is your heart?

The legislation for this has probably been around for as long as income tax itself. The law says that, at birth, you acquire the domicile of your father.

In this case, Ms. Murty’s father has an Indian domicile, so she acquired an Indian domicile at birth. It is not like a footballer choosing to play for a country because his parent was born there – she had little choice in the matter.

Your tax domicile is like a ball and chain; it is very hard to shake off. I accept Ms. Murty has lived in the UK for some while now, but what would happen if she was widowed or divorced? Would she still stay here? That is the relevant test for domicile.

The press articles all said, “this means she does not pay tax in the UK on her non-UK income.” This is correct, but only if she does not bring the income to the UK.

Non-domicile and remittance basis

A non-domicile is allowed to elect to be taxed on the remittance basis, so this is the element Ms. Murty did have a choice over. This means they would pay UK tax on all their UK income and on foreign income brought to the UK.

The tax is due whenever the income is remitted and could be many years after initial receipt. The definition of remittance is very wide and includes goods and assets, not just bank transfers.

After 7 years of being a UK tax resident, a non-domicile must pay £30,000 a year to be allowed to use the remittance basis. After 12 years of being UK resident, this increases to £60,000 per annum. For many non-domiciles, it is therefore cheaper to pay tax on their worldwide income.

After 15 years of UK residency, it is not possible to elect to use the remittance basis any longer. The individual, at this point, acquires a ‘deemed domicile’ status, but note that this does not affect the actual domicile.

Non-doms contribution to economy

So, whatever your views, Ms. Murty has done nothing wrong under existing tax legislation. The legislation was debated during the period of the last labour Government, but even the notorious tax fixer Gordon Brown didn’t stop it.

One reason for this is that the last detailed Government report showed that non-domiciles contributed hugely to the British economy in terms of taxes and investment and, without some tax breaks, would simply relocate elsewhere.

Whether you are resident or non-resident for UK tax purposes, our team of trusted tax advisers can support you with thorough and considered tax planning. To find out more about our personal and business tax services, contact us today.

*Any opinions expressed are those of the author and do not necessarily reflect those of George Hay Partnership LLP or its clients.