Are you missing out on NI savings for your business?

Does your business qualify for the National Insurance holiday scheme? The government are keen to give money back to those businesses who qualify but who have not yet taken advantage of this relief. We can help you get some funds back for your business!

 

In order to qualify for the scheme, the key conditions are:

1.  Your business started after 22nd June  2010

2.  Your business is located in the UK but outside London and the South East of England

3.  Your employees started with your business for the first time on or after 22nd June 2010

 

If your business qualifies, you will be entitled to Employers NIC savings of £5,000 per employee, for a period of one year, for the first ten new employees.

Contact us now to find out more!

The Chancellor's Autumn Statement

Chancellor George Osborne delivered his Autumn Statement on Tuesday 29 November 2011. The Autumn Statement replaces what was known as the pre-Budget report during the time of the recent Labour government.

The Chancellor’s statement provides an update on the government's plans taking into consideration the latest forecasts for the UK economy from the Office for Budget Responsibility (OBR). OBR publish a twice yearly report assessing the UK economy's likely performance over the next five years. The report covers the state of the public finances and assesses whether the government is likely to achieve its goal of balancing the UK's budget within five years.

Within the statement George Osborne conceded that the UK risks falling into recession in the coming months with economic growth forecasted to be 0.7% next year, down from the 2.5% previously predicted by the OBR.

In addition he stated the challenge of cutting Britain's deficit was bigger than previously thought and more savings would be made by restraint in public sector pay.

The following briefing highlights the key points from the statement:

Economy

• OBR 2011 economic forecast revised down to 0.9% from 1.7%
• 2012 forecast revised down to 0.7% from 2.5%
• Economy expected to pick up in 2013, 2014 and 2015, forecast growth at 2.1%, 2.7% and 3%

Public Sector Pay & Pensions

• 1% cap on public sector pay rises for two year after the end of the current freeze next year
• Review into regional pay adjustments
• Rise in state pension to 67 to be brought forward to 2026 from 2034

Education and Families

• £1.2bn extra spending on schools in England
• Half to go to councils for more school places and half for 100 additional free schools
• £50 cut in water bills for families in the south-west of England
• Free childcare places for most deprived two-year-olds in England doubled to 260,000 

Housing

• Mortgage indemnity scheme to help up to 100,000 people buy homes with 5% deposit
• £400m Scheme to kick-start stalled construction projects in England
• 50% discount for social tenants wanting to buy their own homes in England

Transport Costs

• The average rise in regulated rail fares to be capped at 6% - 1% above inflation – in January, rather than the anticipated 8% cap
• Planned 3p fuel duty rise in January to be scrapped.   But duty will go up by 3p in August       

Benefits

• Working age benefits to be increased by 5.2% next year, in line with inflation
• Basic state pension to rise by £5.30 next year to £107.45 per week
• Inflation-linked rise in disability element of tax credits but below-inflation increase in other tax credits

Business & Jobs

• OBR forecast of total public sector job losses up from 400,000 to 710,000
• Credit easing programme to underwrite up to £40bn in low-interest loans to small and medium-sized firms
• £1bn business finance partnership to raise money for medium-sized firms
• Regional Growth regeneration fund to get £1bn in extra funding
• £250m support package for energy-intensive firms, £500m for science
• Business rates holiday relief for small firms extended to April 2013
• New time limits for planning applications
• £1bn ‘youth contract’ to subsidise six-month work placements for 410,000 young people
• Qualifying period for unfair dismissal to be increased from one year to two years from April 2012
• Bank levy to be increased in January

Government Borrowing

• Borrowing forecast increased to £100bn in borrowing over four years
• Borrowing forecast to be £127bn in 2011-12, falling to £120bn, £100bn, £79bn and £53bn in following years
• Debt to GDP ratio to peak at 78% in 2014-5, falling afterwards

Spending

• £5bn new spending over three years, including £1bn for the rail network
• Go-ahead for 35 road and rail projects across England
• Aim to unlock a further £20bn in investment from pension funds

Overseas Aid

• Funding will not exceed 0.7% of total GDP

The new Relevant Contracts Tax System

Subject to the signing of a Ministerial Order, Revenue plan to introduce a new RCT system from 1 January 2012. The new RCT system, while leaving the essentials of the withholding tax intact, fundamentally reforms the way RCT operates and how principals in particular engage with Revenue.

The new system is electronic which means that from 1 January 2012 principals (or their accountant) must engage electronically with Revenue. This requirement is separate from any mandatory efiling requirement. Principals therefore must be registered for Revenue’s Online Services (ROS) to use the new eRCT System.

 Another fundamental change is the introduction of a 20% rate of deduction for subcontractors who are substantially compliant. The principal will be authorised by Revenue to deduct tax at the appropriate rate from each payment to the subcontractor. The rate that is applied to a subcontractor will depend on the subcontractor’s compliance record. In general however, subcontractors who currently qualify for a C2 card will be at the zero rate in the new system, provided they continue to keep their affairs up to date. Most subcontractors currently at 35% will be at the 20% rate in the new system. The 35% rate is being retained for those subcontractors that are unknown to Revenue or who have failed to address serious compliance issues.

Subject to a number of transitional measures applicable in 2012 only, an overview of the changes to take effect from 1 January 2012 is as follows:

Electronic system for RCT principals

All contacts between principals and Revenue will be through a new electronic RCT Service. All principals must be registered for ROS, even if they have previously been given an exempt status from mandatory e-filing, unless they have engaged their accountants to perform all RCT functions in the new system.

 Subcontractors are not required to register for ROS, but if they do, they will be able to view all transactions on their RCT account through the online RCT Service, and avail of 24/7 self service options.

Contract notification

The principal must notify Revenue of each contract through the online RCT Service, providing basic information in relation to the contract. When notified of a contract, Revenue will inform the subcontractor of the details supplied by the principal and will also indicate the subcontractor’s RCT rate.

Payment Notification

The principal must notify Revenue in advance through the RCT Service of each gross payment to be made to each subcontractor. When using the Payment Notification process, the principal will be presented with a list of subcontractors with active contracts; therefore a contract must be notified to Revenue before a Payment Notification can be made.

Deduction Authorisation

Revenue will respond to a Payment Notification with an online Deduction Authorisation which authorises the principal to deduct the tax, if any, from the gross payment notified. The principal must give the subcontractor a copy of the Deduction Authorisation and Revenue will automatically credit the RCT deducted to the subcontractor’s tax record.

If a principal makes a relevant payment to a subcontractor without having notified Revenue of the payment and been issued with a Deduction Authorisation, the principal will be liable for tax at 35% on that payment, together with a penalty of up to €5,000.

Deduction Summary/Returns

After the end of the principal’s return period (monthly or quarterly), Revenue will collate the information from the payment notifications for the period and prepopulate a Deduction Summary which will show details of each payment notified to Revenue in the period. Amendments can be made to the details on the Deduction Summary up to the return filing date. There will be no annual return (currently RCT 35) in the new system.

Subcontractors

Subcontractors will be advised, in advance of 1 January 2012, of the rate which will apply on commencement of the new RCT system. The subcontractor will subsequently be advised of any changes to their RCT rate as determined by Revenue from time to time.

For any further guidance or advice on the new RCT system, please contact our office now!

HMRC checking mortgage applications

HMRC launched the new Mortgage Verification Scheme on 1st September 2011. The scheme involves mortgage lenders cross-checking information regarding income declared on mortgage applications against HMRC income records.

HMRC will be able to request full details of income declared to mortgage lenders and carry out their own cross-checking. There are often valid reasons for such differences and it will be important to make it clear at the application stage why there may be differences between income declared to your lender and income declared on your tax return.

You should speak to your professional advisor before making a declaration of income to your mortgage lender. If you believe that this is something we can help you with, get in touch with us now!

Key to business survival in tough times

Times are tough and they are likely to remain challenging for many businesses. It’s always been the case that only when things are difficult does genuine quality rise to the surface. 

The prospect for the next few years is one in which the economy will be less dependent on government, with spending to be cut aggressively and with one recent forecast predicting a decade of weakness in consumer spending. Exports and investment in new and innovative products and services have to be the engines of recovery.

The changing nature of the economy presents a whole series of questions for any business:

• Ø       How can it manage its workforce through the peaks and troughs of activity?
• Ø       What finance will it need, short term and to invest?  
• Ø       What are the challenges of entering and maintaining export and / or new markets?
• Ø       How does it develop new and innovative income streams?

There is no ‘one size fits all’ answer to these questions. Different businesses will have different requirements but here are a few tips from quality businesses that have succeeded in past tough times:

Put Your Customers First

For the next few years, arguably more than ever, companies need to understand their customers, be able to respond to their needs and the pressures they are facing. Household income has been squeezed, which some experts predict will continue to be the case until 2013. For most consumer-facing businesses, that means offering value for the customer. The key here is to invest time in understanding your customer spending patterns and their needs.  

Take some time out to research these needs; look at how you satisfy these currently and what you could do to improve your offering. Think of ways you can change the delivery of your product or service.

Simple things like discussing your offering with the customer before providing it, letting them know how things are progressing, calling them up to make sure everything went OK after delivery.

Constant communication with your customers before, during and after the sale is a key factor for successful business in tough times. Ask yourself what you could do to improve this in your business.

Also take time to seek out new revenue streams. Consider rebranding some of your offerings and selling abroad or on the internet. What new income streams are available to you and how can you take advantage of them?

Control Your Costs

Keeping the cash coming is fundamental but so is controlling the rate at which the cash flows out. Take some time to think about your costs and what you could do to improve the way you manage your business. Regular review of targets to actual costs on a monthly basis is paramount to good control of your business.

Look at the way you do things - are there alternatives? Consider alternative suppliers, alternative payment schedules, better use of electronic point of sale, stock management and quality control.

Sit down with your accountant and discuss your strategy for controlling costs and the management of these. Brainstorm how you can do things more quickly and more efficiently and formulate a strategy for the next year.

Manage Your Employees 

One of the biggest costs for firms is the cost of employment. Taking on new staff is expensive, equivalent to fresh investment in the business. Many successful businesses are reviewing the value they get from their employees and are taking time to discuss how they can be more customer focused and efficient in their roles.

Look at alternatives to salary rises, the use of performance related pay and a bonus structure that rewards both good service to customers and increases in sales. Get all employees involved in how the business can improve and do this regularly. 

The Blueprint for Success

There is no single answer but there are some general principles. Be flexible, but also be alert to the dangers. The successful businesses of the future will be fast on their feet but also aware of the risks. They will be lean and efficient. They will be the ones who spot and take advantage of the opportunities that are there. Tough as the outlook appears for the coming years, there will still be plenty of opportunities!