Archive for February, 2016
David Cameron commissioned Julie Dean OBE the founder of The Cambridge Satchel Company to carry out an independent review of what additional support could be provided to the growing number of self-employed people.
This could have been triggered by the concern that if the growth continues to be concentrated at the lower end of the income, then this could mean more people become eligible for the working element of tax credits, while the additional tax revenues that come with rising employment will be smaller.
The self-employed now account for 15% of the total UK workforce. At the start of 2016 there are an estimated 4.6 million people choosing to become self-employed. According to research, 43% of self-employed people are now over 50 and 11% are under 30. The number of women choosing to become self-employed has grown. From 2009 women have accounted for more than half of the overall growth in the sector.
Recommendations following the review included:
- Government should consider reviewing how well information on its official website signposts the self-employed to access the advice and support already available
- More flexible mortgage solutions are needed for the self-employed, and trade organisations should play a key role in signposting these
- The location and availability of shared work spaces should be better communicated, and consideration should be given to incorporating such spaces in local libraries and community centres
The reason for growth in the numbers of self-employed could be found in a study by think-tank Bright Blue. They found that self-employed people have much better levels of job satisfaction than employees.
Their report found that 80% of self-employed people were happy with their working life. This was even true for those who were classed as living in a ‘low income’ household, where the total earnings are less than 60% cent of the average household income.
The new Small Business Enterprise and Employment Act will impact all companies and Limited Liability Partnerships (LLPs).
There are many changes being implemented in 2016 including:
- Restrictions on use of corporate directors
- Extension of duties of shadow directors
- Replacement of the annual return with a process for confirmations
- Option for a private company to elect to use the central register
- Procedures for rectification of the register relating to the company’s registered office
- Shortened periods for striking off companies
- Changes to the disqualification of director’s regime and introduction of a new compensation mechanism in relation to insolvent companies
- Easier and simpler to remove the details of falsely appointed directors from the register.
One change is the need to keep a record of People with Significant Control (PSC) so they can file a “confirmation statement” at Companies House.
A PSC includes people within a company or LLP who meet the following conditions:
- Owns more than 25% of the company’s shares
- Holds more than 25% of voting rights
- Holds the right to appoint or remove company directors
- Exercise influence or control of the company.
The information required for an individual is the name, month and year of birth, nationality and service address will be publicly available, together with details of the interest concerned.
If you would like with any of the new rules let me know.
Over the years I’ve been researching what makes some businesses really successful and what makes others average or worse fail.
On the face of it it’s fairly simple – sell something for more than it costs. The truth is that it is easy when you’re your own. The problems seem to start when you start working with other people, employees and sub-contractors.
What I think a business needs is an effective people management system. And, from looking into this I believe this starts with the way you recruit. You need to attract the right type of people to work with you.
But, before you can do this you need to think REALLY carefully about who you are. Questions like these can help:
• What do you want to achieve?
• What do you care about?
• How do you expect people to behave?
• What do you stand for?
• What won’t you stand for?
In business speak these are your vision, values and purpose.
Once you have these in place I suggest you focus on something called “engagement”. This is about people having a positive attitude to work and willingly giving their best.
To do this effectively I think you need a few things:
• A compelling business plan so everyone know where there business is going and why
• Clear position agreements so people know their role in the plan
• Support for people to help them perform to the best of their ability
• A culture where people can provide feedback to the business
• Accountability and transparency in all aspects of the business
• Frequent communication so everyone knows what is going on
If you would like to explore engagement to improve business performance let me know and I will set up a On Track session.
The UK national debt is growing at over £5,000 a second and tax revenues are the only way for the government to stop this growing and pay it off.
Starting April 2016 the government is committed to denying people basic tax reliefs. This will divert personal and business cashflow into the Treasury.
We have highlighted three issues which will have a significant impact:
- Private landlords
- Higher rate tax payers
- Owners of small limited companies
Owners of furnished, residential property will pay more tax because the 10% wear and tear allowance is replaced by a more restrictive replacement cost relief.
Stamp duty is also going up for landlords and next year sees tax relief on loan interest being restricted to the basic rate. This last change could seriously impact the ability of landlords with high debt to property values to maintain their property holdings.
Landlords considering buying a new property should think about bringing the completion date forward to before 1 April 2016.
If you need to replace furniture in a rented property then wait until after 5 April 2016. In this way you can claim for the full wear and tear allowance 2015-16 and next tax year you can claim the new replacement furniture relief.
Higher rate taxpayers
The governments focus here is the reduction of tax relief that can be claimed for pension contributions.
The law is already in place to reduce the amount of pension relief for additional rate (45%) tax payers to just £10,000 a year. Now, there is speculation that 40% or 45% tax relief will be scrapped altogether and a lower threshold set.
Consider maximising your pension contributions before the end of the tax year.
Limited company owners
From 6 April 2016, the first £5,000 of dividend income is tax free, but any additional dividends, will be taxed at:
- 7.5% if the dividends form part of your basic rate band
- 32.5% if the dividend forms part of your higher rate band, and
- 38.1% if the dividend forms part of your additional rate band.
If you use dividends to take out profits from your company, consider stripping out any available company reserves to 5 April 2016 as dividends.
If this can be done without pushing your overall income into the higher rates you will have no additional income tax to pay. Even if the distribution pushes you into the higher rates there may still be overall savings to be made.
Many small business owners are not aware that the law changed in 2004 to allow them direct access to a Barrister.
The benefits of using a Barrister include getting specialist advice before significant legal fees are incurred. Barristers have a deep understanding of the law and the rules of the courts, from frequent appearances in courts. They are experts at legal strategy and dispute resolution, whether in a court or mediation setting.
You can also use a Barrister as a second opinion (to check you are getting best advice) and/or as part of your negotiation.
Not all Barristers are qualified and able to give direct access. However, there a several thousand qualified for direct access and the Bar Council operates a Website where you can find a specialist in the field you need and who is local https://www.directaccessportal.co.uk/
The majority of Barristers are self-employed and share the cost of premises, which are called Chambers. This means costs are affordable and allow expert advice on topics such as:
- Employment disputes
- Copyright and trade mark
- Business leases
- Debt recovery
If costs are an issue it can be possible to arrange finance for legal costs https://legalcostfinance.co.uk/
At Sackmans we prefer to focus on increasing the profit by increasing the top line. But, cutting costs will increase the bottom line so here are five ways to cut costs.
One cost to look at is energy. According to the Department of Energy and Climate change estimates small businesses can save between 18% and 25%. Simple ways include:
- Energy saving lightbulbs
- Timer switches and sensors
- Draught exclusion and insulation
- Double glazing
But, there are other opportunities including reducing the office temperature by 1 degree which could reduce costs by 10%.
2. Manage cashflow
Avoid overdraft fees, interest and fines by having a heathy cash balance.
One way to collect money fast is to no give credit. The value of credit is the interest on your invoice for 30 or 60 days which is likely to only be a few pence. If you have a positive cash balance you can also take advantage of prompt payment discounts and negotiate harder with suppliers.
If customers are paying late consider charging 8% onto the base rate and charge a fixed fee of £40, £70 or £100, depending on the size of the balance.
3. Embrace technology
Leading global consultancy business estimates small businesses could increase productivity by 10%.
One example is using online technology like Xero to streamline your accounting function. Other initiatives include:
- Email newsletters rather than printed newsletters
- Using Skype rather than the phone or mobile
- Switching to VoIP services for telephones
4. Employ great people
Employing the wrong people will cost your business a small fortune.
To do this make sure you share your vision for the business and employ people based on values. Remember, you can train skills – it’s much harder to develop the right attitude.
Use business, project and personal Key Performance Indicators to drive productivity and develop a winning team.
Consider outsourcing activities that you are not excellent at or could be done cheaper by a supplier.
Sackmans could take care of your bookkeeping saving you the hassle of finding and managing a bookkeeper.
Perhaps it would be better for you to outsource elements of your marketing. If you are an ecommerce company could you have stock stored and distributed by Amazon? In time your business premises may reduce in size or disappear altogether.
As Xero approaches 600,000 users worldwide, here are some notes on recent developments at Xero to help you improve your business results in 2016:
- Partner of month for December 2015 was Crunch Boards which enables forecasting and reporting
- The new + icon and search facility saves clicks and time
- Improved Fixed Assets
- Cashflow report helps businesses understand money flowing in and out of their business
- Two step authentication increases security
- Automatic invoice reminders prompt customers to pay so you don’t have to
- Billable expenses make it easy to pass on costs to customers
- Xero on Apple Watch updates you when your bank accounts change
The Xero eco-system continues to grow wand more industry specific add-ons. At the end of last year a property management system called Arthur was added.
Our support of Xero includes a 50 point Xero training programme to ensure you use the system like a pro. We can also you develop a Financial Policy for your business to ensure you have complete control and by using LivePlan we can help you improve your numbers.
The sharing economy began to appear in the early 2000s as people looked for extra cash driven by the impact of the recession.
This new economy (worth an estimated £15n) has been on the radar of the tax office (HMRC) for a while. A consultation document issued by HMRC with the title “Tackling the hidden economy: Extension of data gathering powers” is a clear warning for 2016 onwards for everyone to ensure they declare income from places like AirBNB.
HMRC plan to collect data from third parties and estimates it will raise £285m by the end of 2021. Companies like Apple, PayPal, Amazon, AirBNB and Etsy are high on the target list.
The law supports HMRC. The Finance Act 2013 section 228 gave new powers to HMRC collect data from businesses that process credit and debit card transactions. These powers will now be broadened to data held by electronic payment providers (not necessarily in relation to credit and debit cards), and business intermediaries. Intermediaries are businesses/Websites that allow customers to place orders, buy or reserve goods, services and/or digital products.
According to the ACA, a leading professional body in the accounting world, HMRC are under extreme pressure to increase the tax take. They will turn up armed with data and look to penalise you if they think you are withholding information.
As we move to online reporting the tax net is drawing closer. If you’d like any help dealing with these matters get in touch and remember, our fees are usually tax allowable.