Business Support

In the recent Spring Budget, the VAT registration threshold was raised to £90,000 (previously £85,000) which means that smaller businesses that did not want to register for VAT, now have an additional £5,000 of turnover they can make each year without needing to register for VAT.

Obviously, if you sell goods or services to other businesses, and they are likely to be registered for VAT, if you are eventually required to register you can do so without changing your price structure; clients can simply claim back the VAT you have added to their bills.

But problems arise if you sell to non-business customers who cannot claim back VAT.

Once your business breaches the £90,000 turnover threshold you will be faced with two choices:

1. Reduce your prices so your customer pays no more for your services. For example, if the pre-VAT price was £120, following registration, you would need to reduce your price to £100, which plus VAT at 20% would equal £120. Unless you could increase your sales volume, this would have a serious impact on your profitability.
2. The second choice would be to pass on the VAT to customers. In this case your price would stay at £120, but you would need to charge customers £144 (£120 plus 20% VAT). Unless the goods or services you were selling had limited alternative suppliers, this price hike will likely reduce your sales and profitability.

So, although welcome, the rise in the VAT registration threshold to £90,000 will not overly excite traders who are grappling with the need to increase prices already, to counter inflation, and cope with rising costs.

Traders caught in this do I register or not conundrum do have choices, but they require serious consideration. If you need help to consider your options, please call.

Clients often refer to the VAT added to supplier invoices as if it were a cost to their business regardless of their VAT position.

This is true if you are not registered for VAT, you do not have to add VAT to your sales and you cannot recover any VAT you pay on purchases. Under these circumstances, VAT is a cost.

Most business owners are driven by sales targets and to meet these targets they may be tempted to offer extended payment terms.

For example, if your business grants a customer time to pay – say 60 days – after the services or goods supplied have been delivered, effectively, your money stays in their bank account for 60 days.

Further, if you have incurred costs regarding a sale, which have to be paid for before your customer settles their bill, you are out of pocket until your account is settled.

There is a well-worn cliché in business that cash is king. Business owners should keep a weather eye on the effectiveness of their efforts to turn a sale into cash in the bank. Amounts owed by customers may look like a useful buffer – cash to come in in future months – but you cannot spend or invest trade debtors.

In a recent announcement by the Treasury, it was announced that plans are afoot to deliver up to £1.8bn of productivity benefits by 2029.

The aim is to improve public sector productivity, including releasing police time for more frontline work. 

The Chancellor is promoting increases in public sector productivity as an alternative to accepting an ever-increasing bill for public services as the government sticks to its plan to move on from the high spending and high tax approach that was necessary to get the UK through the shocks of Covid and Russia’s invasion of Ukraine.

According to the Treasury spokesperson, a new focus is needed on the long-term decisions required to strengthen the economy and give people the opportunity to build a wealthier, more secure life for themselves and their families. 

Covering frontline services, the plan is designed to help public servants get back to doing what is most important: teaching our children, keeping us safe and treating us when we’re sick.

According to the Office for Budget Responsibility, returning to levels of pre-pandemic productivity could save £20 billion a year. This would help manage the size of the state in the long term, whilst maintaining public service quality and delivering savings for taxpayers.

The first measures under the Economic Crime and Corporate Transparency Act 2023 (ECCT Act) came into force on Monday 4 March 2024.

Changes introduced include:

• greater powers to query information and request supporting evidence;
• stronger checks on company names; 
• new rules for registered office addresses (all companies must have an appropriate address at all times – they will not be able to use a PO Box as their registered office address); 
• a requirement for all companies to supply a registered email address;
• a requirement for subscribers to confirm they’re forming a company for a lawful purpose when they incorporate, and for a company to confirm its intended future activities will be lawful on its confirmation statement;
• greater powers to tackle and remove factually inaccurate information; and
• the ability to share data with other government departments and law enforcement agencies.

New criminal offences and civil penalties will complement the measures introduced.

The phased roll out of new powers and requirements is designed to minimise hassle for legitimate businesses. Many of the changes will be integrated into existing reporting cycles, such as the requirement to update a company’s confirmation statement.

As further measures are introduced, Companies House will let people who file information with Companies House know what they need to do via their communications channels and campaigns.

The Government has announced action to tackle the use of controversial 'fire and rehire' practices. In a press release issued 19 February 2024 they said:

“Action against unscrupulous employers to tackle the use of controversial ‘fire and rehire’ practices will be rolled out by the Government today [19 February].

Dismissal and re-engagement, also known as ‘fire and rehire’, refers to when an employer fires an employee and offers them a new contract on new, often less favourable terms.

The Government has been clear that it firmly opposes this practice being used as a negotiating tactic. Today, a new statutory Code of Practice has been published making clear how employers must behave in this area. 

This new Code of Practice shows the Government is going a step further to protect workers across the country. This will help to preserve security and opportunity for those in work, as part of our plan to grow the economy.

In future the courts, and employment tribunals, will take the Code into account when considering relevant cases. This will include on unfair dismissal claims where the employer should have followed the Code.

Employment tribunals will have the power to apply an uplift of up to 25 percent of an employee’s compensation if an employer unreasonably fails to comply with the Code.

The new Code clarifies how employers should behave when seeking to change employees’ terms and conditions, aiming to ensure employees are properly consulted and treated fairly.

Employers will now also need to explore alternatives to dismissal and re-engagement and have meaningful discussions with employees or trade unions to reach an agreed outcome.

The Code makes it clear to employers that they must not use threats of dismissal to pressurise employees into accepting new terms. They should also not raise the prospect of dismissal unreasonably early or threaten dismissal where it is not envisaged.”

An experienced entrepreneur has taken up a key role to promote the needs of small businesses to government and ensure suppliers seize the benefits of the Procurement Act.

Shirley Cooper OBE, former chair and president of the Chartered Institute of Procurement and Supply, met Parliamentary Secretary Alex Burghart for the first time as Crown Representative for small businesses earlier this month. 

They discussed priorities for the next 12 months, with a focus on the implementation of the Procurement Act in October, which will see further benefits for start-ups and small businesses wishing to work with the government. These include simpler processes, greater transparency and access to opportunities, as well as strengthened payment terms which will maximise value for money and innovation in the government market.

Ms Cooper will lead on the overall relationship between the government and small businesses, making sure the government gets best value from small and medium-sized enterprises (SMEs), and that they in turn have the best possible opportunity to work with the government.

Shirley Cooper OBE said:

"I am delighted to take up this role and build on the work of my predecessor, Martin Traynor.

I look forward to working with colleagues across Government to make sure small businesses can seize the fantastic opportunities available to them in the public procurement process.” 

She will build on the work of Martin Traynor OBE, who is retiring after a five-year tenure in the post which culminated in the reforms of the Procurement Act 2023. 

Ms Cooper will also support the commitment to, and delivery of, increasing central government spend on SMEs. This spend has risen every year since 2016/17 and stood at a record £21.0 billion worth of work in 2021/2022. The Government spends around £300 billion every year on procurement.

She will be an advocate for small businesses, promoting their agenda both in government and externally. 

Most small business owners are happy, from a financial point of view, if sales are in line with expectations. And there are obvious grounds for this conclusion, after all, if sales dry up there are no funds feeding into cashflow.

Unfortunately, top-line sales are just one aspect of a business that measure bottom-line profitability.

To keep an eye on profitability traders must also monitor costs, and to monitor costs effectively businesses need to create a forecast or budget of future costs and compare actual costs with these numbers.

We encourage business clients to create forecasts on a rolling basis so they can see, in detail, how sales and costs are trending over the next year.

To round off these trading forecasts businesses also need to plot the effects of profit growth on their balance sheets.

Balance sheets gather the profits for the current trading period, add this to any retained profits brought forward and capital you have introduced, and display how this represented by the business assets and liabilities. For example, the value of fixed assets (plant, equipment and vehicles) and current assets (money owed to you, stocks etc), plus bank balances; less liabilities (loans, taxes due, bank overdrafts and so on).

Your balance sheet rounds off your management accounts reporting and together with a statement of profits (compared to forecasts) and cash flow provides you with the financial reporting to manage your business effectively. Making sure your sales are on track is one key indicator of financial well-being, but it is not a complete picture.

If you would like to consider setting up and managing your finances on a regular basis, please call.

If you are considering selling or buying to or from companies based outside the UK, you may well be overawed by the plethora of regulation you are required to be familiar.

As a first step, you could make use of the GOV.UK website and access HMRC’s “digital assistant”. You could use this to find out about:

• getting an EORI number 
• importing your personal belongings
• looking up commodity codes, duty and VAT rates
• trading with Northern Ireland

Take a look at this support page: https://www.gov.uk/business-support-helpline

If the digital assistant cannot help you, you can ask to transfer to a webchat with an HMRC adviser, if they are available.

You can call HMRC for help with questions about:

• importing
• exporting
• customs reliefs

If you think you have been charged too much, find out how to claim a repayment of customs charges in the ‘If you’re charged too much or return your goods’ section of the Tax and customs for goods sent from abroad guide.

Telephone: 0300 322 9434

Opening times: 24 hours a day, 7 days a week

And if you prefer to have something in writing, you can send a letter for help with questions about importing, exporting and customs relief at:

HM Revenue and Customs — CITEX Written Enquiry Team
Local Compliance S0000
Newcastle
NE98 1ZZ
United Kingdom

Include your VAT registration number and the name and postal address of your business.

As an employer, the tax and employment responsibilities you have for your staff will depend on the type of contract you give them and their employment status.

Contract types include:

• full-time and part-time contracts
• fixed-term contracts
• agency staff
• freelancers, consultants, contractors
• zero-hours contracts

There are also special rules for employing family members, young people and volunteers.

As an employer you must give employees:

• a written statement of employment or contract
• the statutory minimum level of paid holiday
• a payslip showing all deductions, such as National Insurance contributions (NICs)
• the statutory minimum length of rest breaks
• Statutory Sick Pay (SSP)
• maternity, paternity and adoption pay and leave

You must also:

• make sure employees do not work longer than the maximum allowed
• pay employees at least the minimum wage
• have employer’s liability insurance
• provide a safe and secure working environment
• register with HM Revenue and Customs to deal with payroll, tax and NICs
• consider flexible working requests
• avoid discrimination in the workplace
• make reasonable adjustments to your business premises if your employee is disabled