A Guide to Preference Claims, and How to Avoid Them

When a company is going through financial difficulties and there is a prospect of insolvency, it is vital to take care over actions taken. This includes who you decide to pay.

If you decide to clear debts with a particular creditor and paying that creditor puts them in a more beneficial position than the rest of your creditors, this action could be challenged by the liquidator or administrator in the event of insolvency proceedings following. This is known as a ‘preference’ under the Insolvency Act 1986.

In certain situations, a payment or transaction that is considered a preference can be set aside. If the payment was made within six months of the start of the insolvency proceedings, or within two years if the recipient of the payment was connected to the company, this will usually be the case.

If a company is unable to pay its debts due to a payment or transaction being made to a particular creditor, or if the company was encouraged by a desire to see the recipient of the payment in a more beneficial position, then the a payment or transaction may also be set aside.

Repaying a director’s loan can also be classed as a preference if the company enters into administration or liquidation.

 How can a company avoid creating a preference?

The most straightforward way to avoid creating a preference is to ensure all creditors are treated equally. Where this is not possible, there will need to exist a proven and commercially feasible reason to have paid one creditor over another.

Such a reason could be that it would have been in the best interests of the other creditors for a particular supplier to be paid so that business could continue.

It is always a good idea to approach creditors like HMRC to request time to pay when it becomes apparent that a company is facing challenging financial times. Asking for support from the bank could also be considered by a liquidator or administrator as proactive attempts to improve a situation.

At the first inkling of financial difficulties within your company, you should always be upfront about what is going on. Discussing the matter in the first instance with your bookkeepers is always a good place to start. They can help you work out your position and make the best decisions that won’t land you in trouble down the line.

Apprentices to be Top Source of Talent in 2018

Are you making use of apprentices to grow your business? 37 per cent of businesses say apprentices will be their top source of talent this year according to a poll of more than 2,000 senior HR professionals.

The poll, conducted by Alexander Mann Solutions, followed the introduction of the Apprenticeship Levy in April 2017. The levy was designed to boost the number of young people going into vocational training.

Previous research by the same organisation revealed that 71 per cent of senior HR leaders are of the opinion that the Apprenticeship Levy will create a new route into the workplace and that it will effectively supplement or even rival the intake of graduates.

Sandrine Miller, head of emerging talent consulting at Alexander Mann Solutions, says, “As these findings suggest, leaders are certainly reassessing where they source fresh talent. And while graduates remain the preferred choice for the highest percentage of businesses, there are signs that the tide is shifting.”

University Applications Down, Apprenticeships Up?

Miller also comments that UCAS has reported that university applications have declined by 4 per cent. “While there will always be demand for graduate-level talent, HR Leaders are increasingly considering the benefits of developing talent in house, where the role allows, as part of a wider total workforce strategy,” she says.

Reports would suggest that new apprenticeship starts have actually reduced by as much as 59 per cent since the Apprenticeship Levy came into force. Miller however believes that this is most likely due to the way businesses are reassessing long-term requirements, taking the time they need to plan and implement new programmes. In other words she says, “It’s the calm before the storm.”

The Apprenticeship Levy

The Apprenticeship Levy came into force on 1 April 2017, replacing all taxpayer funding for apprenticeships for companies of all sizes. 0.5 per cent of an employer’s wage bill goes towards the levy, although there is an offset allowance of £15,000 equating to 0.5 per cent of a £3 million wage bill. This means that all employers with a wage bill greater than £3 million will be subject to the levy.

If you are unsure as to how apprentices could benefit your business or need advice on how the Apprenticeship Levy works, why not seek advice from your local bookkeepers?

How to Boost Your Bottom Line with Charitable Giving

Smaller businesses are able to enhance their bottom line courtesy of charitable donations. But only 20 per cent are actually giving regularly. Here’s why as a business, you should be seriously considering donating a proportion of your turnover to charity.

Research has revealed that the more a smaller business donates to charity, the better its business performance.

On average, small to medium sized enterprises give 1.8 per cent of their turnover to charity. That equates to £32,000 per year. Businesses that donate more than 0.5 per cent of their turnover are 20 per cent more likely to see a boost in profits. They are also twice as likely to enjoy a lift in reputation, and 50 per cent more likely to see and improvement in staff retention and recruitment.

In general, 67 per cent of businesses who regularly make charitable donations reported a positive impact on profitability. The trouble is, a lot of businesses are not aware of the advantages of charitable giving.

The research has been released on the back of the launch of a new giving platform called Work for Good. The platform makes it easier for businesses to make donations to good causes in such a way that proves beneficial to both the charity and the business.

These days there is a much increased expectation from customers to know that the companies they choose to do business with are actively making a difference and showing that they are socially responsible and community minded.

Work for Good empowers businesses to ‘give to grow’. 37 per cent of small to medium sized businesses claim that charitable giving has assisted them in attracting new clients.

Work for Good has been created to build giving into a day to day working routine. The platform makes it easy to give in whatever way suits a business best. All the legal and administrative burden is taken care of and Work for Good helps givers shout about the good they are doing. This helps businesses connect with clients, inspire their workforce and strengthen their brand. As a member you get to display the Work for Good mark which instantly demonstrates your values.

If you are unsure as to how charitable giving could benefit your business in any sense, including from a tax or reputation perspective, why not discuss it with your local bookkeepers?