Small Business Insight - Hawsons Chartered ...

Small Business Insight
   July / 2020              HAWSONS CHARTERED ACCOUNTANTS

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In this issue:

VAT deferment reinstatement
Summer Statement Summary
R&D tax relief could give your business a cash boost
Cash Flow Planning

Introduction
                            A belated welcome to our small business newsletter of
                            2020, and what a year it has been so far.

                            As 2020 dawned little was known about Covid-19 which
                            has become the news story of the year, and the impact
                            it has had on the world economy.

                            Businesses of all sizes have been affected by this, and it
                            is more important than ever for business owners to
                            monitor and plan how they can survive and adapt for
                            the future. In this issue we look at several ways
                            businesses can improve their cash flow position.

                            With a number of tax deferral measures and assistance
                            schemes expiring between November 2020 and March
                            2021, it could prove to be a long and tough winter for
                            many small businesses.

Paul Wormald,               This may be the first edition of this newsletter in 2020,
                            but as a firm we have been very active in helping our
Partner, Doncaster          clients deal with the challenges Covid-19 has placed on
E: pw@hawsons.co.uk         them and in issuing topical articles on a variety of
                            subjects. These can be viewed on our website here.
T: 01302 367262
                            If we can be of help at all, please do not hesitate to get
                            in touch with us using the contact details on the final
                            page of the newsletter.

 Hawsons has a dedicated team of small business accountants in
 Sheffield, Doncaster and Northampton. Our Business Services
 Department is dedicated to helping the smaller business, providing a
 range of tax and accountancy services to small and growing businesses.
 We generally help sole traders, partnerships and limited companies.

 Starting up a new business is a challenging process and there are many
 aspects a small business owner must consider. We have a proven track
 record in helping new and small businesses get off the ground and
 continue to grow. Our small business accountants can help in all aspects
 of setting up and running your business.

VAT deferment period closes on 30 June –
        Reinstate your direct debit
In March, the Chancellor announced that businesses could defer VAT
payments due between 20 March and 30 June 2020 until 31 March 2021. This
temporary change to the payment dates was introduced to help businesses
manage their cashflow.

The VAT deferment period is now drawing to a close, therefore if you
cancelled your direct debit or other payment method this needs to be
reinstated.

Please do this well in advance of your normal VAT payment date so the
payment is collected on time. If the payment is late, HMRC could charge
interest and penalties.

If you are struggling to pay your tax bill on time, you may be eligible for
HMRC’s Time To Pay service. This can allow a business to clear tax debts by
making instalments over a 3 to 12 month period.

Businesses should continue to file their VAT returns as normal by the due
dates.

If you have any questions about your VAT, please contact us.

Summer Statement Summary

On the 9th July the Chancellor announced his Summer Statement to kick-start
the economy. Rishi Sunak has pledged to “protect, support and create jobs”
and get pubs and restaurants “bustling again”

Hospitality

The Chancellor has announced a 50% discount for diners to increase
restaurant demand. Additionally, a large VAT cut has been confirmed for
hospitality and tourism sectors.

VAT on certain items will decrease from 20% to 5% from 15 July to 12 January
2021. However, this reduced rate is only available on the following items:

Food
Non-alcoholic drinks
Accommodation
Attractions

Every UK citizen will receive a “eat out to help out” discount. This discount
will be valid from Monday to Wednesday in August from participating
businesses. It will be a discount of 50% of up to £10 per head.

Stamp duty holiday

The Chancellor announced on Wednesday 8 July 2020 that the threshold for
stamp duty in England and Northern Ireland would be temporarily raised from
£125,000 to £500,000 until 31 March 2021. The aim of this is to increase
activity in the property market. This will also help house buyers that have
been financially affected by a coronavirus.

The Government says that “the average stamp duty bill will fall by £4,500.
And nearly nine out of 10 people buying a main home this year, will pay no
stamp duty at all.”

Jobs and training

Job retention bonus: The Government will pay employers £1,000 for every
furloughed employee brought back to work by the end of January 2021. It has
been calculated that if every furloughed worker is brought back to work the
scheme will cost £9 billion. For employers to be valid for this scheme, the
employee must earn a monthly average of more than £520 in November,
December, and January.

£2bn Kickstart Scheme: This scheme will create jobs for unemployed young
people, which will enable employers to offer young people between the age
of 16-24 years old a six-month placement. The Treasury will cover the
National Minimum Wage for each young employee a company employs for up
to 25 hours a week. With companies topping up workers’ pay if they choose
to employ them for longer hours.

The government is also investing in traineeships and apprenticeships. The
government will offer £1,000 per trainee to businesses. (Capped at 10 jobs
per firm).

New apprentice under 25 years old: Businesses will receive grants of up to
£2,000 for each new apprentice employed.

New apprentice over 25 years old: Businesses will receive grants of up to
£1,500 for each new apprentice employed.

The National Careers Service will receive a funding increase of £32m over the
next two years.

The Environment

Rishi Sunak announces £2bn home insulation scheme

The Chancellor has announced a £2bn grant scheme for homeowners for
energy-saving home improvements, this is part of a wider £3bn project to cut
emissions. The Treasury has said that this funding would help support over
100,000 jobs. Households will receive vouchers for up to £5,000 and the
poorest households will receive up to £10,000 for their energy-saving home
improvements.

The scheme known as the Green Homes Grant will mean that the government
will cover two-thirds of home improvement costs that will save energy. This
scheme will start in September.

Conclusion

It is clear to see that the Chancellor’s priority is to kick-start the economy
after the coronavirus pandemic, by protecting, supporting, and creating jobs.
He is also attempting to create demand in the hospitality sector by offering
UK citizens the “eat out to help out” discount. However, all of this has
resulted in the government borrowing more money to fund the restart of the
UK economy, which could cost the country more in the long run.

R&D Tax Relief could give your business a
                 cash boost
Tax savings and cash flow are more important than ever right now. As
companies look for new sources of cash to replace lost revenues, we are
seeing an increase in the number of enquiries about R&D tax relief. We can
help your company to claim a welcome cash boost from HMRC by obtaining a
rebate for funds you have spent on innovative projects. Make sure you don’t
miss out.

What is R&D tax relief?
R&D tax reliefs are HMRC incentives created to encourage innovation and
technological advances in the UK. For more information, read our R&D Tax
Relief guide.

Am I eligible?
Many companies carry out eligible R&D activities without realising that this
work qualifies for relief.

R&D tax incentives are not just for niche sectors – eligible companies can be
in any sector, any size, and can even be loss-making. A common
misconception is that R&D incentives are only for those who undertake
scientific research in a laboratory, but this is certainly not the case.

Cash Flow Planning
This article serves as an introduction to the fundamentals of cash flow
management. If you need help with anything concerning cash flow or
anything else, then please do get in touch.

What is cash flow?

Cash flow is typically defined as the amount of money moving in and out of
your business. Of course, the preference is for your business to have a
positive cash flow. This means that the cash inflows are in excess of the
outflows enabling you to settle your debts as they fall due. If you have a
negative cash flow it can sometimes require you to source alternative
methods of finance such as bank loans to cover a shortfall. However, this
approach is not normally sustainable in the long term.

How to calculate your cash flow?

To calculate your net cash flow you will first need to select a time period –
typically a month. You total your cash receipts and deduct cash payments
over that period. This is your cash flow. However, it is important to also
calculate this on a quarterly and annual basis which will help you to identify
any cyclical patterns emerging. For example, are there months where your
cash flow is stretched due to seasonality of income? Spotting these trends can
enable you to take appropriate actions.

A few tips to manage your cash flow

1. Keep your records accurate and up to date

It is important to make sure that you constantly update your record of
accounts. If you start to fall behind updating your finances, then your
calculated cash flow may be incorrect which could lead to poor decision
making based on misinformation.

2. Do not be too lenient with customers

It is important to strike a balance between being strict and a pushover when
invoicing clients. It is important that your business has an invoicing strategy
in place to achieve this. You should give customers a sufficient and realistic
timescale to pay whilst not agreeing to lengthy terms that effectively see you
acting as an overdraft for your customers.

3. Keep your accounting simple

If you are not completely confident with numbers, you should use quality
cloud accounting software such as Quickbooks, Sage, and Xero. This will
make it much easier to keep your accounts accurate and up to date. For
more information about cloud accounting please visit our cloud accounting
webpage here. Alternatively, you could hire a professional to do your
bookkeeping for you to free up your time. Visit our bookkeeping services
webpage to find out more information.

4. Keep your business and your personal finances separate

Mixing personal and business finances can leave you confused and unsure
about how your business is performing. Keeping your business and personal
finances separate will provide more clarity on performance whilst avoiding
any tax complications from mixing personal and business expenditures.

5. Build a cash reserve

Building a cash reserve is always worthwhile. This will help when the
unexpected happens (such as the Covid-19 pandemic). Having a buffer will
help your business to survive any unforeseen downturns. Furthermore, it can
enable you to be more reactive when growth opportunities present
themselves.

6. Cut costs

Look through your records and regularly review bills, payroll, rent,
subscriptions, and utilities, etc. Are you spending too much money on these?
Are there any subscriptions that you do not really need that you could
cancel? These are the kind of questions you need to be asking yourself.
Where can you save money that will not affect the performance of your
business?

7. Contingency planning

Does your business have fixed assets such as equipment, buildings, furniture,
etc? Consider what you have that you could sell to generate funds quickly
should you ever need it.

8. Consider leasing equipment instead of buying it

Unless your business can easily afford it you may want to consider leasing
equipment, computers, and vehicles. This helps smooth the cash flow impact
of larger capital purchases.

9. Stay on top of your invoices

Whenever you have completed a job always aim to send the invoice out in a
timely fashion. Make sure you know the correct contact details when sending
an invoice as you do not want it being passed around departments. It is very
important to make your invoices easy to understand so it will not confuse
your clients. E-mailing invoices is often now the preferred method for many
businesses.

10. Offer an incentive for early payments

If you are struggling to get clients to pay on time you could offer an incentive
to persuade them to pay early. This can be anything from offering a discount
or including something additional for free. Obviously, it is very important to
ensure this is affordable for your business before offering it.

11. Business credit cards can help cushion cash flow

Credit cards with rewards attached can be helpful so you can use these
towards future purchases. They can also provide a cushion for your business
during tough times.

Get in touch...

                                                                         Sheffield Partner
Hawsons has a dedicated team of small business accountants in
Sheffield, Doncaster and Northampton. Our Business Services
Department is dedicated to helping the smaller business,
providing a range of tax and accountancy services to small and
growing businesses. We generally help sole traders, partnerships
and limited companies.

Starting up a new business is a challenging process and there are
many aspects a small business owner must consider. We have a
proven track record in helping new and small businesses get off          Scott Sanderson
the ground and continue to grow. Our small business accountants          T: 0114 266 7141
can help in all aspects of setting up and running your business.       E: ss@hawsons.co.uk

                                                                        Doncaster Partner

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                                                                           Paul Wormald
                                                                          T: 01302 367 262
                                                                       E: pw@hawsons.co.uk

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                                                                            David Cairns
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                                                                    E: davidcairns@hawsons.com