Business News England February 2023
Selling online and paying taxes
If you regularly sell goods or services through an online marketplace, you could be classed as a ‘trader’.
And if you earn more than £1,000 before deducting expenses through your trading, you will need to pay Income Tax on this.
For tax, an online marketplace is any website or mobile phone app that handles and enables the sale of goods and services from individuals and/or businesses to customers.
If you only sell items occasionally, you can check if you need to tell HMRC about this income.
If you’ve never declared income through a Self-Assessment tax return, you can register for HMRC Online Services.
Please talk to us if you need any advice in this area.
See: Selling online and paying taxes - information sheet - GOV.UK (www.gov.uk)
UK sets out plans to regulate cryptoasset activities – Consultation announced
Plans to protect consumers and grow the economy by regulating cryptoasset activities have been announced by the UK government.
Cryptoassets – commonly known as ‘crypto’ – are a relatively new, diverse, and constantly evolving class of assets that have a range of potential benefits, as well as posing risks to the consumer.
As is common in emerging technology markets, the crypto sector continues to experience high levels of volatility and a number of recent failures have exposed the structural vulnerability of some business models in the sector.
Under plans set out by the government last week, it will seek to regulate a broad suite of cryptoasset activities, consistent with its approach to traditional finance.
These proposals will place responsibility on crypto trading venues for defining the detailed content requirements for admission and disclosure documents – ensuring crypto exchanges have fair and robust standards.
The proposals will also strengthen the rules around financial intermediaries and custodians – which have responsibility for facilitating transactions and safely storing customer assets.
In addition, to address industry concerns about the small number of Financial Conduct Authority (FCA) authorised cryptoasset firms who can issue their own promotions, HM Treasury is also introducing a time limited exemption. Cryptoasset businesses that are registered with the FCA for anti-money laundering purposes will be allowed to issue their own promotions, while the broader cryptoasset regulatory regime is being introduced.
This approach delivers on the original policy intention of the measure to promote innovation, enhance consumer protection and ensure that cryptoasset promotions can be held to equivalent standards as promotions of financial services products with similar risk profiles.
The government’s approach to regulation mitigates the most significant risks, while harnessing the advantages of crypto technologies. They state that this enables a new and exciting sector to safely flourish and grow, boosting jobs and investment.
See: UK sets out plans to regulate crypto and protect consumers - GOV.UK (www.gov.uk)
Managing your cash flow is essential right now!
With ever increasing supplier prices, a recent rise in interest rates, and a looming recession, managing your business’s cash and understanding the flow are now vital tools in maintaining resilience and being able to adopt flexible strategies for success.
Cash flows reflect all the cash that is flowing in and out of a business. Owners can look at the direction of the cash flows for insights about the health of specific products or services and overall market patterns.
Some types of business are more likely to run into cash flow problems, while other types appear to be more resilient. If you are a business owner, you might be wondering which category your business falls into. No matter how inventive or simple your business model is, you can still have problems with cash flow. Here are our thoughts on managing the flow of cash in your business:
The first stage of understanding and predicting how funds flow is to perform a health check on your accounts. Look at your latest profit and loss statement and check that your income is sufficient to cover your expenses. If your profit is falling behind your expenses and cash flow is slowing down, you might need to take action. Prepare a cash flow statement so you know where the money goes.
Next create a yearly budget and look where cash could become tight and months where you can save to cover off the quieter times. Look at those quieter months and think about flexible work scheduling, new products or services, or other activities to tide you over.
Finally make sure you collect your money from those who owe you quickly. Reward customer loyalty by offering early bird discounts and set credit limits and payment terms to ensure customers follow the rules. If you take on new customers, make credit checks. Penalise late payers and request up front deposits or payment.
Please talk to us about preparing a cash flow statement and annual budget so that you can work on your business for maximum success!
Minimum wage rates increase from 1 April 2023
Employers should be aware that all minimum wage rates increase on 1 April of each year. This includes all National Minimum Wage rates and the National Living Wage rate.
See the table below that shows the current minimum wage rates and new rates from April 2023:
Current rate (since April 2022) | New rate from April 2023 | Increase | |
National Living Wage (23 years old and over) | £9.50 | £10.42 | 9.7% |
National Minimum Wage adult rate (21-22 years old) | £9.18 | £10.18 | 10.9% |
National Minimum Wage (18-20 years old) | £6.83 | £7.49 | 9.7% |
National Minimum Wage (16-17 years old) | £4.81 | £5.28 | 9.8% |
National Minimum Wage (apprentice rate) | £4.81 | £5.28 | 9.8% |
Accommodation Offset | £8.70 | £9.10 | 4.6% |
HMRC see an increase in fraudulent claims for R&D tax relief
HMRC state that they have seen an increase in fraudulent claims for Research & Development (R&D) tax relief. They believe companies in certain sectors are being deliberately targeted by third parties to make inaccurate R&D claims as an amendment to their Company Tax Returns. As a result of this, they are increasing their compliance enforcement activity.
As part of a “One to Many” letter campaign, HMRC have sent letters to company directors whose companies have made R&D claims in the past. The letter asks them to review their previous claims using a checklist to make sure that the information they have provided about their claim is complete and correct and, if there is an error, to make amendments as necessary.
Directors are prompted to review their R&D claims by using the following checklist:
- Have you read and understood the HMRC guidance on R&D?
- Have you considered the conditions for making an R&D claim? Are you happy that the project is seeking an advance in the field of science and technology?
- Do you understand what you’re claiming for?
- Who has helped with the supporting R&D report and are they qualified to do so?
- Have you read the R&D report, and do you agree with its contents?
- If you’re working with a third party to make a claim, have they answered your questions satisfactorily?
- Does this claim seem to be too good to be true?
See: Research and Development Tax Relief - HMRC One to Many letter
Does your company have a shareholders agreement?
For limited companies, when it comes to making decisions, Company Law states shareholders who own more than 50% can pass a motion at a company meeting regardless of the views of other shareholders and if a shareholder(s) owns 75% or more of the shares they control the company outright and can veto the decisions of all other shareholders.
This may not suit all business situations, especially where you have two or more founders holding equal share capital or a group of owners with varying amounts of capital, some of whom are directors and some who are not, but who are all working together for the company’s success.
A shareholders’ agreement is entered into between all or some of the shareholders in a company. It regulates the relationship between the shareholders, the management of the company, ownership of the shares and the protection of the shareholders. They also govern the way in which the company is run.
A shareholders’ agreement can help define how a business makes decisions to the benefit of all owners and is recommended where:
- A small number of owners want to reach collective and fair decisions for the benefit of all;
- Some owners may want to be able to influence decisions that are particularly relevant to them; or
- Some shareholders may not be directors and cannot influence operations on a day to day basis.
Typically it is seeking to deal with the three “D’s” of death, disability and disagreement. It may also cover a variety of other significant areas for example, retirement and buy back of shares.
Our view is that a shareholders’ agreement is an essential document for any limited company and an equitably drafted agreement should provide comfort to all parties to the agreement.
Please talk to us if you need help in planning for an agreement, especially where there are several shareholders, a new company is being formed, a shareholder wants to sell their shares or pass them to their children, someone is nearing retirement, or the company has borrowed money from a shareholder. We can help with share and company valuations and putting the shareholders wishes into an agreement with a local solicitor.
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