Autumn Budget 2017 Key Announcements for Small Businesses

For the small business owner there was a fair amount to digest following Chancellor Philip Hammond’s first Autumn Budget on 22 November. Here we provide an at-a-glance summary of the key points.

VAT Threshold

There were murmurings of a potential change to the VAT threshold, but this has remained at £85,000 for at least the next two years, most likely due to heavy opposition from small business organisations. The news has been welcomed by bodies such as the Federation of Small Businesses (FSB), which have been campaigning on the subject of VAT reform for some time, arguing that it has the potential to drain the resources of the smaller business. The stay could however be just a temporary measure, with a rumoured overhaul to the VAT system coming in 2020.

Business Rates

From April 2018 the Retail Price Index (RPI) will be replaced with the Consumer Price Index (CPI) with the CPI being used to calculate business rates. This should in practice save businesses quite significantly, with collective savings reckoned to be in the region of £2.3 billion over three years.

Staircase tax was abolished with a promise to business owners affected by it since it was introduced that their original rates bills would be reinstated. There was also an announcement that following the next business rates revaluation in 2022, such revaluations will take place every three years rather than every five years.

Tax-Free Personal Allowance

The personal allowance has increased from £11,500 to £11,850 per year. This will result in an overall tax reduction in 2018/2019 of £1,075.

Research & Development Tax Relief

Small businesses that conduct research and development and claim the RDEC standalone tax credit will benefit from further tax relief measures. The rate will increase from 11 per cent to 12 per cent of a firm’s qualifying research and development expenditure.

British Business Bank Boost

The British Business Bank (BBB) has been given a funding boost of £2.5 billion. This comes as part of a larger £20 billion Patient Capital investment designed to assist fast-growing businesses in scaling-up. The funding has the objective of encouraging more long term investment in scale-up businesses carrying a greater risk. It’s the biggest government commitment to date to the BBB.

National Living Wage

 The National Living Wage (NLW) paid to workers aged 25 plus will increase to £7.83 from £7.50 per hour, resulting in a £600 per year increase.

Partnership Tax

Legislation has been updated to fall in line with commercial arrangements for allocating profit shares with the objective of avoiding additional administrative burdens for taxpayers. The changes will come into effect as of the tax year 2018-2019.

Marriage Allowance

The Marriage Allowance – the amount of unused personal tax allowance that can be transferred between spouses or civil partners - will increase to £1,185 as of April 2018. Marriage allowance claims are now allowable on behalf of deceased spouses and civil partners as of 29 November 2017.

If you have any queries or concerns about the changes brought in by the latest Budget, why not discuss them with your local bookkeepers?

 

Key Ruling in the Long Running Self Employed or Employed Argument

Is your workforce employed or self-employed? The recent high profile case involving Uber drivers may well have connotations for other employers operating businesses on a similar basis.

The question as to whether your workforce or parts of it is classed as employed or self-employed has been a source of contention between businesses and HMRC for many years.

The issue of employment status is considered serious by HMRC, which is keen to get to the bottom of whether claims by business owners that its workforce is self-employed are genuine. If workers are deemed to be employed rather than employed, then the business owner is liable for making tax and National Insurance contributions. Obviously HMRC is eager to ensure it is receiving all the contributions it should.

Uber Judgement: Drivers ARE Workers

Just in the past few days and in one of the most high profile cases of its kind, the Employment Appeal Tribunal (EAT) has confirmed that drivers for the well-known taxi firm Uber should be classed as workers who are entitled to basic employment rights.

It was the Uber drivers who argued that they should be classed as workers. In Aslam and others v Uber BV and others, the Employment Tribunal held that the drivers are entitled to receive paid annual leave and to earn the National Minimum Wage, amongst other benefits.

Numerous factors played a part in the ruling. Whilst Uber drivers are able to make their own choice as to where and when they work, they are subject to an interview and induction process and can be dropped if they fail to perform or are found guilty of serious misconduct, following a set warning process.

The drivers however have to work exclusively for Uber, which is a key indicator in establishing whether a relationship is employment based.

There have been other high profile cases in the past, for example Addison Lee, which met with the same ruling as Uber. Deliveroo and CitySprint came under similar scrutiny.

What Now for the Gig Economy?

The gig economy – the blanket name for the type of working arrangement that these companies follow – has in the past involved numerous companies attempting to shroud their workforce arrangements undercover of a self-employment basis. However, courts and tribunals have recently uncovered the fact that they are in fact employment based agreements.

The recent Uber ruling will have far reaching connotations for its 40,000 or so strong workforce. It is thought that many of the drivers will seek to make back-dated claims for minimum earnings, holiday pay and other such benefits that they should have been entitled to since they were taken on.

TUC general secretary Frances O’Grady said: “This ruling should put gig economy employers on notice. Unions will expose nasty schemes that try and cheat workers out of the minimum wage and holiday pay. Sham self-employment exploits people and scams the taxman.” 

Be Sure to Check the Employment Status of Your Workforce

It is crucial for business owners to be clear on how their relationships with their workforces will be construed by HMRC.

If you are unsure as to whether your workforce should be classed as employed or self-employed, discuss it with your local bookkeepers. They’ll advise you as to the correct status so that you can take appropriate steps to ensure your business is risk free in this respect.

The Importance of Getting Your Buildings Reinstatement Value Right

The property from which you operate your business is obviously of vital importance. What would you do if it was completely wiped out? No doubt you’d rely on your buildings insurance to cover you for full reinstatement.

If this is the case, then you’ll need to check something vitally important: that your buildings reinstatement value has been quoted correctly on your insurance policy. If it hasn’t then you won’t be adequately covered, which means you won’t be paid the amount you need to get your premises back to where it was or to cover your incurred costs during its rebuild.

One of the most common mistakes made when insuring commercial premises is with the reinstatement value. A lot of people believe that the reinstatement value, also known as the ‘Declared Value’ or rebuild value, tallies with the current market value of the property. This is not the case however.

What is Reinstatement Value?

Reinstatement value refers to how much it would cost to completely rebuild a property from scratch. As well as the actual rebuild itself, the value will include other factors such as site clearance, debris removal and professional fees for surveyors and architects.

If you get the reinstatement value wrong then you could end up underinsured, which means your insurer will only pay out a proportion of the total rebuild cost, and that will be directly connected to the amount by which you are underinsured.

So for example, you have insured your commercial property at a Declared Value of £100,000. The actual rebuild cost runs to £300,000 however. The insurer will only pay out a third of any claim you make.

It is therefore a false economy to declare a lower rebuild cost, even if it appears tempting in order to keep the premium down.

How to Calculate the Correct Reinstatement Value

You can obtain a reasonably accurate reinstatement value from a recent mortgage offer. However, the most accurate figure and perhaps the only 100 per cent guaranteed one will come from a qualified buildings surveyor’s report. Their report will follow a detailed inspection and will therefore be completely accurate, as well as being something you can totally rely upon.

Bear in mind that reinstatement values should be regularly reviewed, as costs do rise.

The good thing about investing in a professionally calculated reinstatement value is that it could well uncover the fact that you are paying more than you should be for your buildings insurance.

GDPR Essentials for Businesses

Back in August we wrote about how a new Data Protection Bill was set to be published in September this year which would bring the EU’s General Data Protection Regulation (GDPR) into UK law.

GDPR is now officially due to come into force on 25^th May 2018 and will mark the most wide-ranging change to global privacy law in two decades.

GDPR will apply to any organisation that provides goods or services to or tracks or creates profiles of EU citizens. Brexit won’t stop its introduction, especially as until March 2019 we remain part of the EU, but in any case it is widely believed that the UK will adopt its own legislation that will incorporate the GDPR legislation.

GDPR should in theory make the business owner’s life easier because there will be clarity as to how they should be controlling data. There are all sorts of new rules that must be followed, with failure to do so resulting in substantial fines that could reach €20 million or four per cent of group global turnover.

How to be GDPR Compliant

As a business, there are three key areas in which you’re going to need to ensure you are compliant.

Consent

Anyone you wish to contact for marketing purposes must have opted in to receive communications from you via a ‘clear, affirmative action’. You are no longer permitted to use pre-ticked boxes hidden away at the end of a form or terms and conditions. Neither can any wording that relates to receiving marketing communications be ambiguous or unclear. Opt-outs are no longer allowed; GDPR heralds the age of the opt-in. It’s going to be necessary to cleanse existing mailing lists so that everyone opts in under the new rules, otherwise you will no longer be able to contact them after May 2018.

Right to be forgotten

You can no longer keep data for any longer than you need to, and for anything other than its intended purposes. Data must not be kept indefinitely and any EU citizen will retain the right to request that their data is removed where no legitimate reason exists to process it.

Personal data processing

Data can no longer be held just for the sake of it. A legitimate reason must exist for you to have brought data together. You must also have a clear reason concerning what you intend to do with the data and for how long you will need to use it. You’ll need to be upfront with consumers as to this information.

Time to get ready for GDPR

There is no time to waste in preparing for GDPR. Whilst it may seem a long way off, the fact is there is a lot to do, and if you haven’t ensured that everything is in place by the deadline of 25^th May 2018, then you could be at risk of non-compliance fines.

If you have mailing lists that need to be opted in, you should not leave this to the last minute as consumers could well end up fed up with the bombardment of email requests by this time, which could lead to wholesale deletion.

There is useful guidance on the Information Commissioner’s Office website as to how you’ll need to comply with GDPR. You could also talk to your local bookkeepers for tailored advice on the various aspects that apply to your particular business.

Why Employers Need to Beware of Vicarious Liability

Employers insure their own risks, covering themselves for actions they take that may lead to a claim for compensation. But what about the actions of their employees or third parties, where does an employer stand should a claim be made against them for something someone else has done?

Vicarious liability is the situation where employers could be liable to pay damages where someone who works for them, either employed or outsourced, causes losses or personal injury to another through actions taken during the course of their duties.

Because the extent of the liability can be far-reaching, vicarious liability puts employers in a very vulnerable position indeed.

Two cases in point

There was a case reported recently involved Barclays Bank, where various claimants put in a complaint about being sexually assaulted by a doctor engaged by the bank to undertake medical examinations on prospective employees. The employees won the case, finding Barclays liable. There was also a similar case last year involved Morrison Supermarkets plc. A customer of one of their petrol stations accused a worker of racial abuse and physical violence, and the supermarket was found liable for the worker’s actions.

Of course, neither Barclays nor Morrisons had condoned or encouraged the behaviour, but because the courts ruled that the assaults were so closely related to the jobs of the assailants, the businesses had to be found liable.

Both cases clearly demonstrate how a business can be liable for the actions of its employees and third party contractors, despite the fact the business would have found it pretty much impossible to prevent the actions and also despite the fact that the actions fell outside the scope of the conduct that would have been reasonably expected.

How to reduce the risk of vicarious liability?

In vicarious liability cases involving discrimination, employers can attempt to avoid liability by demonstrating that it has taken all practicable steps to prevent the discrimination taking place.

However, in cases involving personal injury, this defence is not available. Employers should therefore place their focus on prevention rather than defence. But how to do this?

Firstly, start with your policies. Ensure they include very clear rules on conduct, equal opportunities, health and safety and grievance and disciplinary issues. Be sure to enforce the rules, and instigate training to ensure that they are fully understood.

You should give consideration to which of your policies should apply to third parties and contractors.

Individual roles should be closely defined and of course, adequate supervision and monitoring should be in place.

Of course, you will never be able to fully protect your business from the actions of another person, which is why you should put appropriate structures in place to enable you to deal with any liability and its financial implications. These structures could include, for example, extended insurance that covers vicarious liability, and indemnities within contractor and supplier contracts.

Vicarious liability isn’t an incredibly widespread problem, however it does exist and carries with it potentially damaging financial and reputation related risks, so it is vital to be prepared.

How to Get Your New Business Off the Ground

Had an idea for a business? All businesses start with an idea, but you need to take the next step and transform that idea into something tangible.

It’s at this stage that you may start to feel overwhelmed and lost at sea. However, it’s not actually as challenging as you might think, especially if you break the overall task list into smaller, bite-size chunks that you find more manageable.

The following advice should help you segregate the process and get moving with your business idea.

Draft a Short Business Plan

Before you start groaning at the thought of putting a lengthy plan together, you needn’t worry because all you really need is a one or two page document with the aim of getting straight on what resources, time and budget you are going to need to get you up and running and trading safely for the first year.

The early stages are all about road testing your ideas, so it’s definitely not worth spending too much time on your business plan. Having said that however, you do need a structure to follow and defining your vision, mission and objectives is vital, as is putting together a basic action plan including outline strategies.

Set a Budget

No business should get off the ground without a budget set out for starting up, operating and marketing. You’ll need to be realistic and allow a contingency for unexpected costs.

You’ll need to work out how much you are spending each month so you can see how long you can continue to operate without turning a profit – that’s how long you’ll have to start making it work. Ideally you’ll want to start earning profit wise within one to three months, but do try to keep a contingency fund untouched so that you have a reserve should things not go quite to plan.

Work out a Legal Structure

Whether you start up as a sole trader, a partnership or a limited company must be given due consideration. Talk to a local bookkeeper or accountant for tailored advice, as the advantages and disadvantages of each option will vary. There will be administrative and financial accountability differences to think about, together with risk considerations, so be sure to consider all your alternatives carefully. If you are setting up with partners, then you must have a partnership agreement in place to protect all your interests, regardless of how sound you believe your relationships are.

Start Marketing Early

Even whilst you are still in the set-up phases, you can start getting organised with your marketing. You’ll need a website and online presence and this can take some time to pull together. At very least be sure to secure your domains both for your website and social platform, so you know you’ve got them. You can also start networking early on and spreading the word about what your new venture has to offer.

Take Professional Advice

It’s important to take professional advice when setting up a business. Financial advice, legal advice and, if you need it, business development advice. Listen to those who’ve done it before; ask for advice online on business forums; talk to people at networking events; read, read and read more. The more support and knowledge you have, the better chance you will have of success.

Good luck! And if you could use some guidance from a team of experienced bookkeepers, please get in touch!

Autumn Budget 2017 Predictions

The Autumn Budget of 2017 is set to take place on Wednesday November 22, with the major annual financial update by Chancellor Philip Hammond switching from the spring.

Here we take a look at what is potentially on the cards.

Stamp Duty

There has been talk for some time that Stamp Duty is putting off potential home buyers and movers and therefore putting pressure on the housing market in the UK. Whereas Stamp Duty income has reached a record high, home sales have taken a dive. There are therefore calls being made on the Government to remove Stamp Duty altogether for older homeowners, with the aim of encouraging downsizing so that larger family homes are freed up for younger families.

Homebuilder McCarthy & Stone has recently conducted research revealing that pensioners would be more inclined to make a move to a smaller property if there was no Stamp Duty to pay. It is also thought that Stamp Duty has brought higher value sales to a halt, creating a knock-on effect throughout the remainder of the market.

Nick Leeming is Chairman of Jackson-Stops. He said: "Philip Hammond must view the property market through the eye of the homeowner and come up with a solution in the Autumn Budget.

"If they were to take steps to reform the impact stamp duty has on the top end of the market, even just marginally, they would not only see their revenue dramatically increase but it would also get the market moving again at all levels.”

Alternatively, the liability for the tax could be switched from buyers to sellers, suggests the AAT (Association of Accounting Technicians). The AAT says this would boost mobility at all levels, because people on their way up the ladder would be paying duty on the lower-priced house that they are selling rather than the one they are buying. They say it would also give more first time buyers a leg up onto the property ladder, whilst keeping the Treasury’s income intact.

Phil Hall, head of public affairs and policy for AAT said: “It’s widely accepted that Stamp Duty adds a burden to any homeowners seeking to move - especially first-time buyers - because they must pay the tax as an immediate upfront cost together with finding a deposit, surveyors and solicitors fees and so on.

"This stunts mobility, impacting on employment and productivity as well as reducing the supply of new homes, which adds to the affordability crisis.

"Switching liability to the seller would be a relatively simple way of solving these problems.”

Pensions

It is thought that pension tax relief may be under threat. The current system links relief to the income tax rate of a saver. This means that tax payers in the higher rate band enjoy a 40 per cent relief rate, whilst those on basic ate get 20 per cent.

There is talk of a flat rate of 33 per cent, which means earners in the middle band would be hit harder. Pensions director at Aegon, Steven Cameron, feels that tax relief should not be changed until Brexit is done and dusted however, so that savers have some security for the future. He says that consideration should be given to combining pension and stamp duty policies instead.

"Reducing stamp duty would encourage pensioners to downsize, freeing up family homes with benefits across the housing market while boosting funds to pay for retirement," he suggested.

It remains to be seen of course what will actually transpire on 22 November, but rest assured we’ll be reporting it right here, so keep us bookmarked.