The Chancellor’s Budget for Business

In his budget on March 21^st, George Osborne insisted that his measures were designed so that we could “work our way out” of the troubled economy. His aim, he said was that UK businesses could “have the self-confidence to invest, expand, hire, innovate and be the best.” There were not many surprises among his announcements, because many of his ideas had been leaked and discussed beforehand.

How is he Helping Business?

They did include some tax benefits for small businesses. Corporation tax is being reduced by 1% this year bringing it down to 24%, with another reduction to 23% in 2013. However, for businesses with a turnover of up to £300,000, it will remain at only 20%. Some employers’ National Insurance contributions are slightly reduced as well, so the cumulation of these reductions may add up to a worthwhile benefit.

There is also a radical tax change on the horizon for small businesses as the Chancellor has pledged to consult on a simplification of the tax regime. His idea is to have just a single type of tax payment required for all companies falling within a new definition of a micro-business.

Good budget news for the retail sector is the relaxation of the Sunday trading laws for eight weekends from 22 July while the Olympic and Paralympic Games are on. Planning regulations are going to be more relaxed too, which may be welcomed by the construction industry and other businesses that may be hoping to extend their premises.

A Leg up for the Young

Budding entrepreneurs of between 18 and 24 years of age are eligible to apply for an enterprise loan under a £10 million pilot scheme due to start this summer. The loans will be similar to the student loan scheme and are meant to give young people a step up on the ladder to success, provided they have a viable business idea.

Encouragement for Top Rate Tax Payers

The controversial 5% reduction in the top band of income tax for high earners is intended to encourage more investment and business activity in the UK, and deter them from taking their business and their money elsewhere. The Revenue appears to think the Treasury will not lose out much by this, since many high earners have sought ways of avoiding paying the 50% tax anyway. Critics of course feel that any tax reductions should go to the lower income end of the scale, since so many poorer families are struggling.

It remains to be seen whether the Chancellor’s tactics will give Britain the overall business boost he is hoping for. Contact your local bookkeepers for the latest advice on tax matters.

Could you be Paying Unnecessary Tax?

A recent Small Business Tax Action Report issued by unbiased.co.uk predicts that SMEs in the UK will waste around £7.15 billion by paying unnecessary taxes. The tax system is so convoluted that busy entrepreneurs and their staff are unable to understand where they might save money that is currently going to HMRC. Only about three in five small business owners use a professional tax adviser who could prevent them paying unnecessary tax.

Benefits of Incorporation

Many sole traders, small family-owned businesses and partnerships could easily reduce their tax load by incorporating. Changing the legal status of the business by turning it into a limited company or limited liability partnership gives access to different income tax breaks and savings on national insurance contributions. According to the report, about 1.3 million businesses could benefit in this way and this is the where the highest level of wastage lies.

Benefits of Outsourcing

The next highest level of unnecessary tax lies in not outsourcing to self-employed contractors in certain business areas. As long as these people offer their services to others as well, there is no danger of them being considered disguised employees. Some current staff might welcome a move to self-employment, if they would have guaranteed work from the ex-employer at the start. Experienced members of staff at the top end of the salary scale are most likely to find this option attractive and would also save the business the most in employer’s NI contributions as well as salary, which includes sick pay, holiday pay and possible other benefits the employer has to provide.

Claiming the Benefits of Research and Development

Many SMEs are also failing to claim their research and development tax relief. This is set at 225% in the current tax year, 25% up on last year, and significantly reducing taxable income. Something like 78% of the businesses eligible to claim this actually do so. It seems a shame that it is mostly the larger enterprises which regularly employ bookkeeping professionals to deal with their tax affairs, which reap the benefit of this significant tax relief.

Authors of the Report

The aim of unbiased.co.uk is to encourage and help people to find different kinds of financial advisers, so it could be debatable whether they are unbiased. However, their research does have the ring of truth, and it could certainly be worth considering their suggestions where they might apply. Having some outsourced bookkeepers is certainly a step in the right direction.

Don’t Fall into the Trap of Ambush Marketing

The International Olympics Committee (IOC) is concerned about the practice of ambush marketing where companies try to gain competitive advantage by basing their marketing campaigns on some aspect of the Olympic or Paralympic Games.

The reason it is so frowned on is that these sporting events cannot take place without sponsors who fork out large sums to have an exclusive association with them. If their non-sponsoring competitors jump on the bandwagon via the back door, they may think twice about committing themselves to further sponsorship.

Infamous Examples of Ambush Marketing

A notable example of ambush marketing at another sporting event occurred in the 2010 Football World Cup when Holland was playing Denmark. A Dutch brewery sent some gorgeous girls, dressed in orange mini dresses displaying the brewery’s logo, to mingle with the fans. This was seen as an unlawful commercial activity and two of the girls were arrested while the rest were sent packing.

In the case of the Olympics, there is competition from big business to become sponsors of such a high profile event, and those that are not quick enough off the mark often try to hijack the benefits of those that gain the advantage. For example, in 1996 the Games were held in Atlanta, USA, and the official sports clothing sponsor was Adidas. That company’s competitor, Nike, brazenly displayed its brand within the stadia and distributed free flags containing its logo to ticket holders, so that many people thought it was the official sponsor.

New Rules to Prevent this in 2012

But this year, new regulations on marketing rights have been put in place to prevent such activities, and stop the relating of products or services to the Games. Even the use of certain images, words and phrases which can be easily associated with the Games is prohibited. With revenues in excess of £100m raised from sponsorship, the IOC is expecting the London Organising Committee to protect the sponsors and vigorously pursue those in contravention through the courts.

If you don’t want your finances to be depleted by the heavy penalties for non-compliance, you would be well advised to issue a new policy document requiring your marketers to avoid making any reference to the Olympics. In particular, they should not combine naming the Games or the year with the words, gold, silver, bronze, medals, London, sponsors, summer – all words that connote aspects of this year’s Olympic and Paralympic Games. For advice on employee policies, speak to your bookkeepers and office assistants.