The Chancellor’s Autumn Statement is two steps forward, one massive leap back with changes to the VAT flat rate.

The papers have been awash with analysis of the Chancellor’s Autumn Statement, the state of the economy, the impact of Brexit and how the JAMs are going to suffer more for longer.

The Federation of Small Businesses said its impact for SMEs would be “modest and medium term”. For me, there are three things which really stand out that’ll affect my clients and their businesses: two good, one bad – well we can’t have everything can we?!

I’ll start with the bad news…

The changes to the HMRC’s VAT Flat rate scheme to avoid abuse of the system are now complicated and awaiting confirmation but the upshot is that it will be costly news to many businesses like my own – accountants and consultants – service rich but goods poor operations.

The HMRC overview is here but let me clarify.

What is it changing to? A new 16.5% VAT flat rate for businesses with limited costs will replace the current system of sector specific percentages.

How will it work? Up till now, businesses had been able to decide which flat rate % was applicable to their company by trade sector, but now they must decide if they meet the definition of what constitutes a limited cost trader. (This is set to be defined in new legislation).

For some businesses using the scheme, or thinking of joining the scheme, they will need to complete a test to decide whether they should be on the scheme and use the new 16.5% rate.

The new 16.5% category will only apply if costs of goods are either: less than 2% of turnover or if over 2% but less than £1000 per annum. Goods will be specifically defined for the purposes of the measure.

Who will it impact? It will impact service oriented businesses in many sectors whose sector VAT rate is currently significantly lower. It will take time and significant effort to define who is eligible and will result in many businesses paying more tax.

When will it come into effect? April 1st 2017, but it may be backdated to now. Watch this space as more detail, definition and legislation is to come.

On the plus side…

The Chancellor’s financial golden nugget for SMEs was earmarking a not insignificant £400m into venture capital funds through British Business Bank Investments (BBBI) in a bid to unlock £1bn of finance and boost firms’ ability to grow – whether that’s a start up that’s looking for phase 2, a scale-up or to stay ahead.

How it works: The Fund will specifically target later stage ventures through the BBBI VC Catalyst Fund – a stage the BBBI has identified as having a funding gap preventing businesses reaching their full potential.

How to apply for funding support: The BBBI finances through 90+ partners and uses venture capital, equity and debt finance to help fund company expansion as it doesn’t distribute funds directly. This particular £400m pot will be distributed through the VC Catalyst Fund and its partners. To work out which is the best VC for your business to apply to – start with the Business Finance Guide.

Finally, it’s great to see the Chancellor confirm his plans to permanently increase the business rate relief, taking 600,000 small firms out of the rates system completely and lowering bills significantly for many others. Rural businesses will now get 100% relief on rates – which is fantastic news.

So for many small businesses it really is a case of two steps forward, one back…

WrightCFO is an outsourced Finance Director consultancy specialising in part-time FD contracts in the SME market. Contact me for a free consultation.

www.wrightcfo.co.uk

sophie@wrightcfo.co.uk

Tel. 0208 943 9027

 

 

What you need to know: The TAXING issue of Christmas Party Budgets and Bonuses

THE OFFICE — Season 2 — Pictured: (l-r) Rainn Wilson as Dwight Shrutte, Jenna Fischer as Pam Beesly, Steve Carell as Michael Scott, B.J. Novak as Ryan Howard, John Krasinsky as Jim Halpert — Photo by: Paul Drinkwater/NBCU Photo Bank

It’s Christmas time, so goodwill to all men, women, employees, staff, contractors..….that is unless you’re dealing with budgets and the HMRC, in which case you still need to tow the line and know where you stand!

Christmas parties, annual bonuses and their funding can be a minefield. Designed to thank staff for all their hard work during the year, create a comradely atmosphere, engender goodwill for the company and incentivise staff for the year ahead – they can easily fall flat if managed wrongly.

So what do you need to know to ensure your party doesn’t poop and your Brucey bonus is met with a cheer rather than a sneer.

Christmas parties

From a tax point of view HM Revenue gets pretty festive (for them) at this time of year, but you need to know what you’re doing as it’s always a favourite spot check for auditors!

Here’s what you need to know..

1. Providing your Christmas party is ‘an annual event’, costs £150 or less per head and is open to all your employees you don’t have to pay tax, National Insurance or report it to the HMRC.
2. Also, if your business is multi-site but you have one big party or you want to have separate parties for different departments, these are also allowable as long as all of your employees can attend one of them.
3. If you have a summer and Christmas party for instance – as long as the combined cost is less than £150 per person per annum, it’s still exempt.
4. BUT if your annual entertainment expenses are over £150 per person you must then report this on each employee’s form P11D and pay class 1A National Insurance on the full cost of the event.

Now all you have to do is decide, when and where to hold it to make sure everyone has a good (but not too good!) time!

Incidentally, my top five tips for value for money for a Christmas bash are:

• Look at lunch options (often much cheaper and better value).
• Consider a shared Christmas parties in a large venue – often these are great fun and the larger scale enables cost savings.
• Negotiate with your venue – you’ll get more flexibility on price and offer on a Monday lunch than a Thursday/Friday night.
• Look at location – somewhere with good transport links for your staff to get to and from is often important but slightly off the beaten track is also where you’ll get better value.
• You probably need to have some booze allowance, but it needn’t be excessive – you don’t want to be responsible for getting everyone plastered!

Also, don’t forget, depending on what line of business you’re in, a nice touch and ‘free perk’ can be closing the office for the key Christmas days, providing your customers won’t be needing your services. Given the time of year, many businesses will encounter minimum loss of revenue and production while gaining goodwill at a minimal cost.

Bonuses

Before we even start with the tax side of this, the key with bonuses is that you need to have a system and that system needs to be fair. That’s not to say it has to be even, but fair – without favouritism or discrimination – or you risk your well-intentioned bonus turning into a divisive source of contention.

 

Depending on your business and your aims of giving the bonus, your system should be based on a three key factors.

 

• You need to decide whether you are rewarding the company, team or personal performance – or a combination of all three (and what weight each part will play).
• It’s also important to know what you’re basing the bonus on – sales figures, company revenue, completing a specific project, developing new/existing business etc.
• And finally, how are you going to measure (and reward) performance with realistic, achievable and clearly definable targets.

 

So what about the tax?

Whatever you decide to base your system on, there are tax implications on all cash and bonus payments (including vouchers – HMRC definitions can be found here). You will need to pay tax, National Insurance and have reporting obligations.

 

With cash – it counts as earnings so you need to add it to their other earnings, deduct and pay PAYE tax and Class 1 National Insurance through payroll.

 

With non-cash – it depends on the item but you may still have to use PAYE if you’re giving staff something that can easily be converted to cash.

 

Payment Considerations

 

Amount – Bonuses can be based on many different calculations including a % of salary/new sales/gross profit of sales, invoice value or just a flat rate. It must be enough to matter, but not so much it’s unaffordable to the company and should only be payable once the expense of recruiting a new employee has been recovered.

Bonuses can be discretionary or guaranteed – ideally for company flexibility it should be described as “variable, discretionary, non-contractual and subject to Company review at any time” (although it’s worth noting that in any legal dispute precedent will be taken into account).

 

Performance related bonuses should be paid only after a basic threshold has been exceeded and should ideally be uncapped but self-financing. It’s also possible to consider a sliding scale for your bonus scheme.

 

Timing – if you’re basing a bonus on sales figures make sure that bonus payout allows time for your business to have received the cash benefit from the sales and established that the new business was bona fide.

 

Timescale – do you want to give an annual bonus at just Christmas, or would you rather incentivise staff throughout the year with smaller quarterly bonuses (often a good idea for sales-related jobs). This is especially important when it comes to employees leaving – where employee entitlement needs to be clear regarding notice periods etc.

 

And finally, when it comes to splashing cash – The downside with cash bonuses is there’s always a direct comparable to the previous year and staff can come to expect more and more each year. If you decide cash isn’t the way, then don’t be afraid to be creative.

 

• I’ve worked with companies who give a hamper style ‘goodie’ box to all staff equally, no matter what their position, and it contained things like chocolates and champagne to points for the company’s loyalty scheme (a hotel company).
• Another company distributes a Santa’s wish-list where each employee chooses their own gift – these can range from anything from practical items like household goods, to hampers or vouchers for experiences (a large media company).

WrightCFO is an outsourced Finance Director consultancy specialising   in part-time FD contracts in the SME market. Contact me for a free consultation.

http://www.wrightcfo.co.uk

sophie@wrightcfo.co.uk

Tel. 0208 943 9027

Corporate Fraud – make no mistake, you are a target, don’t become a victim.

“My business won’t be affected by fraud, It’s too small to be a target.” 

“We know our customers and it’s always been ok so far.”

“We try to be aware but we know we don’t do enough to protect ourselves, so far we’ve been lucky.”

These are the kind of statements many businesses come up with when I speak to them about the threats of corporate fraud. The truth is that although small businesses often think they’re not, they are in fact extremely vulnerable, as many fraudsters see them as easy or soft targets.

Focusses the mind, doesn’t it. So what do you need to know.

Types of Fraud to look out for

Fraudsters are extremely entrepreneurial! They’re always thinking of new scams and tricks to dupe unsuspecting businesses. The fraudsters’ top modus operandi is abusing payment methods. A recent scam involves an urgent request by ‘senior/top management’ for a money transfer for a sensitive transaction that tries to bypass normal procedures. A second fraudster poses as a lawyer. Review internal procedures about how transactions are requested and approved. Ensure staff stick to procedures and checks at all times, make it clear that even a CEO/MD would never ask staff to flout these. If in doubt check with your finance director, who should not mind being asked! 

Here are some other key areas & issues to be wary of…

Supplier

Many general supplier scams involve abusing the purchasing process. Suppliers (or fake suppliers) use various methods such as fake invoices, advance fee scams, procurement fraud, insolvent trading and phoenix companies which dissolve/reappear as a different company after receiving the goods but without paying, and telemarketing office supply scams that con employees into ordering, and paying for, unwanted overpriced goods.

Internal

Employee fraud includes scams such as procurement fraud, expenses fraud, false accounting, payment and receipt fraud and even personnel management such as abuse of sick leave and flexi-working as well as asset and information exploitation where employees use the company for personal gain.

Customer

Customer-based scams often use cheque overpayment and reimbursement requests as well as electronic payment and card fraud using stolen cards or cardholder not present tactics. Longer term fraud, where customers establish a trading history before then placing big orders, receiving the goods and disappearing. This type of scam also often targets new online companies, defrauding them in a much shorter timeframe.

IT Scams

Computer software fraud can involve fraudsters pretending to be tech support from big IT companies like Microsoft or Apple. They ask to verify credit card details etc to obtain access to systems. The Microsoft Lottery is also a popular scam – it does not exist.

Assets

Today ‘assets’ are as much our online identity as stock and property. The top scams include ID fraud, IP theft, hacking, account takeovers as well as insider fraud where employees (or third parties) abuse their position to steal cash, credit notes, intellectual property and more.

Other

Business directory, marketing and charitable donation scams use innocuous or rejection documents with small print to trick companies into signing up to their services and ‘donations’ – obviously they’re not bona fide.

My top tips to help your business avoid becoming a victim of fraud

1. Deny requests to dodge proper process (invoicing, payment, delivery). Always ask for invoices, never pay out because you feel pressurised, always get everything signed off through the proper verification processes.
2. Check and (if in doubt) double check email addresses and phone numbers before making transactions. Check for one or two letters difference from a true company email/domain.
3. Look for irregular purchasing patterns, lack of interest in products, bulk buying, delivery irregularities. If in doubt, ask questions about the order or request more ID.
4. Be suspicious of cheques made for more than the order amount, requesting the difference to be transferred back.
5. For online based transactions, set up bank verification systems such as Verified by Visa or MasterCard SecureCode to give added protection.
6. Check credit history of trade customers and research their online reputation – or even publicly filed records such as those at their Companies House.
7. Be wary of emails with internet hyperlinks to click on. Hover over the link to check the web address, if you have any doubts about that web address, type it into Google (NOT your browser) and you may find it is a fraud.

Want more info? Here are my top 10 useful links.

1. Action Fraud is the national fraud and cyber crime reporting centre. It provides useful prevention advice as well as free fraud alerts detailing new scams.
2. Get Safe Online provides business advice to safeguard physical and data security.
3. The Information Commissioner’s Office offers A practical Guide to Online Security
4. The Fraud Advisory Panel provides advice on how to protect your business.
5. Chartered Institute of Personnel & Development provides advice on managing (and mitigating) staff fraud.
6. Experian provides credit checks as well as advice and updates on their ID and fraud blog
7. Financial Fraud Action UK has advice on electronic payments (Cards)
8. The Bank of England website offers guidance on counterfeit cash & currency
9. The Cheque & Credit Clearing Company provides tips to avoid cheque fraud
10. Even more sites and useful information can be found here.

WrightCFO is an outsourced Finance Director consultancy specialising   in part-time FD contracts in the SME market. Contact me for a free consultation.

http://www.wrightcfo.co.uk

sophie@wrightcfo.co.uk

Tel. 0208 943 9027

 

 

WrightCFO- Introducing the new team. We’re here to help.

This was going to be a blog introducing you to the newly expanded WrightCFO team. And it still is. However, I must first address the more pressing issue that this week, the UK voted to leave the EU. It may take some time to sink in and assess what the implications are for your small or medium business however, here are a few good reads I’d like to share with you. They may just help make sense of it all.

Richard Mullet of The Legal Partners has put together a short summary of “What Happens Next” which contains knowledge worth equipping yourself with.

http://www.thelegalpartners.com/article-50-leaving-the-eu-and-what-happens-next/

The accounting firm Kingston Smith published a useful article yesterday called, EU: the UK has voted to leave but what does this mean for SMEs?

http://www.kingstonsmith.co.uk/insights/eu-uk-voted-leave-mean-smes/

I found this article to be encouraging and positive in the light of uncertainty. UK businesses must and will go on.

At WrightCFO , we are here to help.

An outsourced, part-time FD has proved such a popular and such a cost effective way for businesses to get flexible, top level financial advice in bite-size portions that we have been rushed off our financial toes.

We’ve been so busy in fact, that I’m delighted to announce I’ve recruited six new FD superstars to the WrightCFO team, all of whom are very commercially focused. Full information on each affiliate’s experience and expertise can be found on our ‘Meet the Team’ page, but for now, let me give you a 60 second run down.

Olivia – is a qualified CIMA management accountant with 20 years’ experience across media, licensing, advertising and entertainment industries.

She specialises in

• providing management with financial insight to help them manage their businesses better
• efficiencies and improving profit margin
• client profitability analysis

Sofia – is a qualified ICAEW chartered accountant and fellow with 15 years’ experience across media and entertainment industries in both small and large multi-national businesses.

She specialises in

• advising business leaders on strategy and finance
• business reviews and strategic planning
• change management and process implementation

Ivana– is a qualified ACCA chartered accountant and fellow with 12 years’ experience in commodity trading, private equity, tech, wholesale, retail and manufacturing.

She specialises in

• investment appraisal and due diligence
• establishing overseas subsidiaries and ongoing management
• providing strategic and operational financial advice to SMEs and Startups

Sian – is a qualified CIMA management accountant with experience across manufacturing, engineering, technology, logistics and digital business services industries.

She specialises in

• turnaround and rescue situations
• assembling and managing international finance teams
• building  strategies for sustainable profitable growth

Thomas – is a fellow of the Association of Certified Accountants with over 30 years’ experience across the financial services intermediary market and has a very keen interest in the charity sector.

He specialises in

• driving strategic direction and business planning
• advising executive boards
• evaluation of potential acquisitions

Paul – is a qualified CIMA management accountant, also with an MBA. He has 25 years’ experience across multiple industries including media, technology, agency and creative industries.

He specialises in

• broad financial, commercial and strategic CFO leadership to SME owner-mangers
• established-business issues such as divisional underperformance and stagnation
• originating, evaluating and executing, new ideas, strategies, plans and investments

We look forward to getting you the Right financial advice from the WrightCFO & helping you and your business find the best financial solutions to improve your business.

To discuss your business’s financial requirements just call or email us on 07817 784 603 or sophie@wrightcfo.co.uk.

 

Sadiq Khan’s First 100 Days

What does the new London Mayor mean for The Capital’s small businesses?

“I’m determined to be the most pro-business Mayor of London yet. I’ll make engagement with industry – from small independents and start-ups to global corporations – a key part of decision making at City Hall.”                                                                                       Sadiq Khan, April 2016

He’s ‘talked the talk’, now what everyone wants to know is whether Sadiq Khan, the new mayor of London can actually ‘walk the walk’ on his promise to be “the most pro-business Mayor London has ever had.”

During the campaign, his pledges focussed on supporting small businesses and flexible office space, as well as promoting London’s tech scene and driving the sector to new heights. But now he needs to come up with some practical measures to make it all happen.

So what do we really want to see him achieve in his first 100 days? These are the top 7 areas I will hold him to account on.

Housing – Get a Strategy. The CBI has already called on the Mayor to sort out the housing crisis, and wants a strategy announced within these first crucial few days. Without this, there’s a real and present danger that the capital’s businesses will suffer, unable to get local staff and workers for mid-ranging jobs that are so vital for many – and especially small, independent – businesses to prosper. In short, without more homes for local residents to buy and rent, we’re all stuffed.

Tech – Start that Pipeline. Skills is another hot potato for the mayor – who pledged to put apprenticeships “at the heart of his agenda” as well as champion the tech industry. I applaud his commitments to create a tech talent pipeline, an open data strategy, improve broadband and even introduce a Chief Digital Officer and Skills for Londoners Taskforce but these positions need to have more than just a desk at city hall but real teeth and funding to help them have real impact.

Business Advisory Board – Get the right people on board. Let’s hope that this does actually get full representation from forward thinking experts in small business, entrepreneurs and female business leaders, not just politicos & cronies.

Small Business Premises – Change the Playing Field. I particularly like his pledge to take on councils & protect working spaces including ‘incubator’ and start-up premises threatened by property developers as well as promoting the creation of small business space within the London plan. It’s vital that there is enough affordable workspace in London to house our flourishing entrepreneurial community.

London Living Wage – What a relief! I agree with promoting the £10/hr London living wage but am equally pleased by the Mayor’s pledge for business rate relief on it. This is a welcome move that should help SMEs reduce the cost burden of rising salaries and ever increasing employer regulations.

Affordable Childcare – Payday for Childsplay This would obviously be a great boost to key workers but the proposed campaign for business rate relief for childcare providers would also be a welcome initiative that would benefit many (mainly female) solopreneurs.

Visa rules – Change that reg. For the many multi-cultural businesses in the city, this would be a great move allowing easier access to international talent and provide a more authentic product or service.

On the whole it would seem, that on paper at least, the new Mayor could be good for small independent business, but we need to keep the pressure on. Can he deliver on all 7 pledges within his first 100 days in office? We’ll have to wait and see.

WrightCFO Ltd is a Financial Consultancy  specialising in part-time Finance Directors for SMEs. Every business deserves affordable access to board level financial and strategic advice, allowing the business owner to concentrate on driving their business forward. If you think your business might benefit from an outsourced part-time FD, please get in touch.

sophie@wrightcfo.co.uk

wrightcfo.co.uk

wrightcfoblog.wordpress.com

@sophieLwright

07817 784 603

Under pressure! – the fight for women’s equality continues

Women’s equality and our place in the workforce has never been a hotter topic, and with good reason.

Over in the US, Hillary Clinton’s bid for president (and Donald Trump’s incendiary comments) have made equal opportunities and women’s issues a key electoral issue, while in Australia’s Queensland, a university cake sale highlighting pay inequality hit international headlines after sparking a ferocious feminist backlash. Back in the UK, we’ve seen Nicola Sturgeon vowing to ‘break barriers’ for women and a there seems to be an irrepressible surge of support for the recently launched Women’s Equality Party.

So why is it all coming to a head now?
As part of the generation of women who grew up in the 80s under Margaret Thatcher, we were told we could have and should want it all. We are now ‘middle aged’ (cringe) and have fulfilled our side of the bargain – we worked hard at school and university, we got our degrees and the careers many of our mothers only dreamed of and some of us even married men who believed we were equal to them.

But now that my generation is reaching mid-life, we’ve finally reached the position where the amount of inequality that is still out there is becoming increasingly apparent. The pay gap, the chances to return to work and unequal opportunities are now staring us in the face.

It’s worth noting here, that up to the age of 30 women outperform men in career and salary. By 40 that lead has been decimated. Obviously this is when many women have children and it is where the veil of equality starts to unravel.

Many of my generation of women have not so much fallen off the career path, but found the path ripped up and the route to get back was riddled with inequality and antiquated sexist attitudes. How often does the mum applicant not get the job because potential employers fear she will be flaky or unable to juggle her work with family life?

From my experience, women who return to work after having had children work incredibly hard to over-prove their worth, work effectively, juggle priorities, multi-task well and are less likely to take time off than younger counterparts.

So where does this leave us?
The first thing to note is that equality is not just a women’s issue and equality in the workplace benefits companies, families and society alike. If unchecked, gender inequality was recently estimated as costing the global economy around $12 trillion by 2025.

There are many theories about quotas, pay transparency, uptake of parental leave and more but at the end of the day it comes down to employers as individuals believing that it’s the right, best and most productive thing to do for their company.

Women can bring so much to a workplace and I believe those of us already in it need to do what we can to mentor and help both those just starting out or trying to return. There is a vital need for women to help other women, be their support, champions and provide the ladders to help others up.

I actually think it is our duty, for the sake of the next generation of working women, to make it an easier path for them than it is for many today.

And for anyone who doesn’t think we need to keep up the fight for equality, I urge you to look at these stats below. The generations coming up behind us don’t realise they need to keep battling for equality, so if we give up the fight now, they and their children will realise only too late that they are still stuck in the world of unequal pay, unequal chances and unequal treatment.

• The full time gender pay gap is 10%
• The average part-time pay gap is 34.5%
• It is estimated that for each year a mother is absent from the workplace her future wages will reduce by 5%
• Approximately 70% of people in national minimum wage jobs are women
• 54% of women working part-time have been found to be ‘employed below their potential’, which amounts to 2.8 million women

Source: UKfeminista.org

 

WrightCFO Ltd is a Financial Consultancy  specialising in part-time Finance Directors for SMEs. Every business deserves affordable access to board level financial and strategic advice, allowing the business owner to concentrate on driving their business forward. If you think your business might benefit from an outsourced part-time FD, please get in touch.

sophie@wrightcfo.co.uk

wrightcfo.co.uk

wrightcfoblog.wordpress.com

@sophieLwright

 

Nine Budget Boosters for Small Business & Entrepreneurs

It’s safe to say this month’s budget was rather overshadowed by Ian Duncan Smith’s spectacular resignation and subsequent government retraction over proposed disability cuts. However, there was some seriously interesting stuff in it for small businesses that I think got rather overlooked.

Bear in mind that Osborne’s budget (and everything most politicians do right now) is most probably dictated and influenced by their stance on the upcoming referendum on Europe, but this was clearly a budget designed to encourage independent small business – as that demographic is seen by the government as critical to the success of a ‘remain’ vote. Small businesses were even labelled the ‘clear winners’ of the budget, so let’s see what rewards have been reaped in the battle to win over SME’s hearts and minds…

Here are the Chancellor’s 9 budget boosters for small business.

Business rate relief – the threshold has been more than doubled from £6,000 to £15,000 for small business rate relief, while the higher rate has increased from £18,000 to £51,000. This will take many small businesses – they reckon over 600,000 – out of the system altogether and could mean your business pays no business rates at all, or at least significantly less – around £6,000/year. Osborne also added that in the future, business rates increases will be based on CPI rather than RPI, which should provide more realistic rates bills for retailers.

Self-employed NICs – from April 2018 class 2 National Insurance Contributions will be abolished for the self-employed, meaning you will only pay one type of National Insurance (Class 4 NICs) for profit of £5,965 or over per annum.

Income Tax threshold – from 2017 the threshold for paying income tax will be raised from £11,000 to £11,500, while the higher rate will also be raised from £43,000 to £45,000 for the 2017/2018 tax year.

Corporation tax – is to be cut from 20% currently to 17% by April 2020, in theory benefitting around 1 million companies according to the Treasury.

Entrepreneurs’ Relief Extension – An extra £10m has been added to the existing limit to encourage investors to back unlisted companies.

Capital gains tax – The reduction of capital gains from 28% to 20% and the basic rate cut from 18% to 10% will affect the sale of equity in businesses only (so not residential sales) and will apply from the start of the new tax year next month (April 2016).

Commercial Stamp duty – The chancellor has abolished stamp duty on commercial property sales up to £150,000 value, then set simple new bands of 2% on sales from £150,000 – £250,000 and 5% thereafter.

Sharing economy businesses – to try and keep up with the times, two new tax free allowances worth a combined £1,000 have been created for income on property you own and trade conducted through online sharing platforms.

Online equality – overseas retailers will no longer be able to store stock in the UK and sell online without paying VAT.

While these measures were widely welcomed by small business and entrepreneur representatives, it’s worth noting that in last autumn’s statement Osborne & the government announced cuts of 17% to the Department of Business, Innovation and Skills, as well as the surprise axing of the Business Growth Service – including the Growth Accelerator programme which helped an estimated 18,000 small businesses to raise over £100 million of finance.

Now they plan to pay for these budget boosters by cracking down on big firms and their flexible tax reduction practices such as offsetting debt interest against profits and using losses in one year to offset profits in another.

So let’s just hope Osborne and his team manage to do this more successfully than they have done to date, and that small businesses can finally reap the rewards of long overdue measures to help level the playing field.

 

WrightCFO Ltd is a Finance Director Consultancy for SMEs. If you think your business might benefit from an outsourced part-time FD, please get in touch.

sophie@wrightcfo.co.uk

wrightcfo.co.uk

wrightcfoblog.wordpress.com

@sophieLwright

HMRC under fire…and we need to keep the heat on high

It’s fair to say HMRC have had a pretty bad start to the year. Google-gate coincided with the end of the tax year underlining their eye-wateringly low effective tax rate of 3%, while millions of normal taxpayers looked on in disbelief with nothing short of envy, frustration and anger.

The unfairness of it all is made worse by the Chancellor’s proposals to ‘simplify’ tax by making businesses file mini-returns quarterly.

What’s the issue?

So for anyone who’s missed what this is all about – it’s part of the HMRC’s strategy to Make Tax Digital – a revamping and overhaul of the current antiquated system, that’s supposed to take tax reporting and collection into the 21st century. The controversial proposal to make returns quarterly hit the news again this year after it was first mooted at the in the 2015 Spending Review and was discussed in parliament on 25 January after a petition against them got over 107,000 signatures.

Whilst the general idea of updating our antiquated tax system and Making Tax Digital seems sensible and I can see the benefits of encouraging those businesses who are not yet online to go digital, we need to be careful that the changes benefit not just the HMRC but business too.

The furore over the quarterly tax return, as it was dubbed, is a prime example. In a world where we already have excessive red tape, deadlines and requirements for business management processes, to make deadlines quarterly, rather than annually, can only make more work not less.

What they say?

HMRC argued that it was not proposing a quarterly tax return, that the updates would: “reduce the burden and cost to business of keeping their tax affairs up-to-date and make it easier to spot mistakes. Quarterly updates will largely be a matter of checking data generated from record keeping software or apps and clicking ‘send.”

Hmm, I’m not so sure

But I – and over 100,000 others – simply don’t buy this HMRC line that it will be a quick press of a button to essentially download information that already exists. Figures will have to be prepared, mini audits conducted and man hours spent collating this information and reporting it in the required format.

Filing even mini returns or HMRC-worthy financial updates four times a year may be useful for the HMRC and help streamline their operation but it will be more work for small businesses, and especially for those who outsource all their accounting, it will also undoubtedly be more expensive.

At least the HMRC plan on introducing these reforms gradually after lengthy discussions and consultations – and this makes scrutiny even more relevant and important.

The quarterly tax return uproar and the row over Google & pals’ arrangements are vital to hold the government and HMRC to account. We need to make sure that the reforms which arise work for everyone not just ease the Revenue’s workload management or help big business pay less tax.

SMEs need to keep the heat on and make our voices heard.

 

https://petition.parliament.uk/petitions/115895

 

http://www.wrightcfo.co.uk

sophie@wrightcfo.co.uk

 

Raising finance for the new year

Happy New Year. For most of us, January is a prime time for taking stock and making plans. These plans often involve needing hard cash to finance either a start up, or expansion of your current business.

But what type of finance you need depends on how much you require and what you want it for, so I thought it would be useful to provide a run-down of the different types of funding available and where to find it – after all, it’s getting harder and harder for small businesses to get financing from banks.

A loan – but instead of being from a bank try a community finance source. Responsible alternative lenders which can be found at http://www.findingfinance.org.uk/ or community development finance initiatives http://responsiblefinance.org.uk/. These are usually best for start-ups or if you need a fixed amount to invest in something specific rather than day to day outgoings. For variable cash flow and to cover peaks & troughs, an overdraft might be more appropriate. Beware that loans which come with interest repayments, may need to be secured against your property and can be inflexible.

Invoice Financing – is where a bank or financial institution buys your business’ unpaid invoices for a fee – the amount depends on the finance company used. If your business has to pay for goods up front this can really help with your cash flow. Companies can receive up to 85% of the value, freeing up cash for you to invest back into the business.

Invoice Discounting and Debt Factoring – are the two types of Invoice Financing used in the UK. The former allows you to manage your own ledger and collect your own debts, while factoring means the finance company liaises directly with your debtors – both systems involve a fee for the service. Lenders can be found through the Asset Based Finance Association.

Equity Financing- is where an investor – often a venture capitalist – acquires part of the business and then shares in the business’ profits and losses. This shares the financial risks and profits but also gives away part of your business. For venture capital companies click here. (Only applicable to limited companies, not sole traders or partnerships.)

Grants – These are given for specific projects from the government, the European Union, local councils and charities. Although the process may be competitive, the grant often may not need to be paid back in full or have interest repayments attached. However the money will have to be used for the purposes that they were allocated. See what you might be eligible for here.

Crowd Funding – Involves lots of people lending smaller amounts of money that’s pooled to raise the investment through companies such as Crowdcube and Seedrs and is currently a really popular way to try and get funding. But beware! Its new found popularity is quickly making it a very competitive market, so although it can be cheap and relatively quick to launch, if the funding target isn’t reached the pledges are returned to investors. A list of crowdfunding platforms and what markets they cover is at http://www.ukcfa.org.uk.
Angel Investors & Peer to Peer Loans– Generally successful entrepreneurs who want to invest in start ups. There are now companies that can put businesses needing funding in touch with potential angels such as The UK Business Angels Association. Similarly Peer to Peer loans are private investors who wish to make a personal investment in a business for a fee – Zopa.com is currently the UK’s largest platform for this.

These links are useful if you’re thinking of launching a start up this year…

• Find out more about the government’s start up loans here https://www.gov.uk/start-up-loans and how to get funding for them here https://www.gov.uk/starting-up-a-business/get-funding

• The government’s Seed Enterprise Investment Scheme provides investors with tax relief, making your company more appealing for investors.
I’ll be speaking about raising finance at the Richmond Entrepreneurs Conference on 25th February 2016.

http://richmondchamberofcommerce.co.uk/thursday-25th-february-2016-richmond-entrepreneurs-conference-2016/

Want to read my blog as soon as it comes out? Please “follow” on bottom of page.

http://www.wrightcfo.co.uk

sophie@wrightcfo.co.uk

 

Smarter Not Harder – 6 steps to Make Year End Hassle Free

 

I for one can’t believe that we are already nearly at the end of November. The list of things piling up on my ‘to do’ list is growing at an alarming rate and that’s not even counting Christmas, which I know is just around the corner.

As the rest of the world starts 2016 with fresh eyes, full of hope and promise for the new year ahead, finance folk are busy working away on last year, sometimes for months, sometimes until midnight! So to give yourself a head start, it pays to do some of the hard work now.

There are several things you can do now as prep work that will save you time and hassle in the long run. Here’s my 6 step checklist of how to make the process easier by working smarter not harder – I promise it’ll put you in a really strong position to help avoid those stress-induced migraines.

1. COMMUNICATE – now to staff that year end is approaching. Explain what they need to do and agree with them when it will be done by. There are always a few who’s expenses are notoriously late. Tell everyone they need to get their expense claims in before the end of December. You don’t want to spend half of February working out accruals for expenses.

Plus ask staff to tell the accounts department of any supplier invoices they are expecting but have not received yet, so you can start working on your accruals spreadsheet now.

2. FAKE IT. I like to do a “pretend” year end at the end of November.

In this I ensure that

• all balance sheet accounts are reconciled
• I have back up for every account
• there are no missing bank statements
• I have the last month or two of supplier statements and that they have been reconciled.
• Fixed assets in the register are actually still in the building
• Also, if you are large enough to need an audit, ask your accountants for their “to do list” now and allocate a person per item so it is their responsibility to get that area organised.

If you can get most things you need into an audit file before the end of December, then you just have to add the last months worth, it once you’ve closed December.

3. ANTICIPATE what is going to be asked of you.

• do you have a “sundries” account? Your accountant will want to know what’s in there. Have a look, move it to another nominal code, or make a note of what the items are.
• Your financial statements will have to disclose Directors’ remuneration separately. So dig into your salaries account, and break out any Director’s salary, so you know what it is.
• If you have projects that fall over the year end period, make sure you have accurate backup showing what percentage of revenue you will take into this year, and how much into the next. Timesheets are great, if this is appropriate for your business.
• Have copies of invoices ready in a file for large capital expenses.

4. NEGOTIATE your accountant’s fees BEFORE the work is done based on the work produced NOT the time taken. You can’t negotiate once the work is finished, so make sure you know what it’s costing you. You also need to know how much to accrue in accounting fees.

5. DESIGN your year end management accounts now. Try to make them a little more colourful and informative than your usual monthly accounts pack. Decide what to include now, and set everything up so it just needs to be pullulated when the figures are ready. This can take time to set up, so do the hard work now. Plug in the numbers later. Things to consider including are:

• a growth chart, (if growing) for year on year comparative
• Client or product profitability
• Head count analysis
• Consider extra analytics that are appropriate for your industry

6. TAX PLANNING – No one wants to pay more tax than they need, so consider (or ask an accountant) what tax reliefs and allowances may be applicable to you and your business and make the most of them. This is not tax avoidance, just tax saving opportunities that enable you to only pay what you need.

Consider any or all of the following… capital allowances, pension contributions, fixed assets/depreciation,  capital gains tax allowances, UK tax residence position, the timings of dividend and bonus payments, gift aid, company share option plans, share incentive plans.

And finally…

 Note…Capital allowances for sole traders, partnerships and companies has been reduced to from £500K to £25K from 1 January 2016. And tax on dividends increases next spring.

Don’t forget…Use the Year End process to review the year just gone and assess what could be improved on. From that create a  plan for the year ahead.

Good luck & see you on the other side!