There are several incentives offered by the Government that small or medium businesses (SME) can access now to help them invest and grow.

1. Claim up to £5,000 with the Employment Allowance

Employment Allowance allows eligible employers to reduce their National Insurance Contribution (NIC) liability each year. Last month, HMRC increased the Employment Allowance from £4,000 to £5,000 to further benefit SMEs, which is a new tax cut worth up to £1,000 for nearly half a million SMEs.

Businesses will pay less Employers’ Class 1 National Insurance each time they run their payroll until the £5,000 has gone or the tax year ends (whichever is sooner), if their Class 1 National Insurance liabilities were less than £100,000 in the previous tax year. To find out if your business is eligible, get in touch today or find out more here.

2. Help to Grow: Get a discount of up to £5,000 on new software

The Government provides two ‘Help to Grow’ programmes to assist SMEs grow their business and build towards reaching its full potential:

• Help to Grow: Digital

This is a UK-wide Government backed scheme which allows businesses to choose, buy, and adopt digital technologies which will help their business develop.

Eligible businesses can receive a 50% discount when buying new software, worth up to £5,000 per SME. Businesses can also access online, free impartial advice and support about how digital technology can boost their business’ performance. 

• Help to Grow: Management

This scheme provides SMEs with access to a 12-week learning course on a range of topics from leadership and financial management to marketing and digital adoption, all designed to fit alongside work commitments.

This management course is 90% funded by the Government so businesses only pay £750, and it is delivered through leading UK business schools and by one-on-one support from expert business mentors.

By the end of the management programme, businesses will have developed a business growth plan to help reach their full potential.

To be eligible, businesses must be a UK-based SME, actively trading for at least one year, and have a total of between 5 – 249 employees.

3. Get up to half off Business Rates – from April 2022

There is a new business rates relief scheme which allows businesses such as small retail, hospitality, and leisure properties worth £1.7 billion in 2022/23, to benefit from 50% off their business rates bills, up to a cash cap limit of £110,000 per business.

The Government will reimburse local authorities that use their discretionary relief powers to grant relief. To find out which properties can benefit from relief, please get in touch or find out more here.

In addition, the business rates multipliers, which are used to calculate how much business’ rates should be paid, have been frozen for another year. For 2022 to 2023 the business rates multipliers are 49.9p for the small business multiplier and 51.2p for the standard multiplier.

From April 2022 there are no business rates due on a range of green technology, including solar panels and batteries, whilst eligible heat networks will receive 100% relief, helping business save around £200 million over the next five years.

4. Invest in your Business: Super-deduction and Annual Investment Allowance (AIA)

• The Super-deduction

For expenditure incurred from 1 April 2021 until the end of March 2023, companies can claim 130% capital allowances on qualifying plant and machinery investments and a 50% first-year allowance for qualifying special rate assets.

Under the super-deduction, for every pound a company invests in any qualifying machinery and equipment (which can include the purchase of computers, most commercial vehicles, and office furniture), their taxes are cut by up to 25p ensuring the UK capital allowance regime is amongst the world’s most competitive.

• Annual Investment Allowance (AIA)

The AIA provides 100% relief for plant and machinery investments up to its highest ever £1 million threshold until 31 December 2021. Originally due to revert to £200,00 at the start of 2022, the extension of the £1 million limit for the Annual Investment Allowance allows businesses to spend up to £1 million on qualifying business equipment and deduct in-year its full cost before calculating taxable profits.

You can only claim AIA in the period you bought the item. The date you bought it is:

• when you signed the contract, if payment is due within less than 4 months, or
• when payment is due, if it’s due more than 4 months later.

You cannot claim AIA on business cars, items owned for another reason before starting the business, and items given to the business or business owner(s).

For more information, please get in touch or find out more here.

5. Fuel Duty

From 23 March 2022, the Government has implemented a 5p per little fuel duty cut on petrol and diesel for 12 months.

This cut, with the additional freeze in fuel duty in 2022 to 2023, will represent a £5 billion saving worth approximately:

• £200 for the average van driver
• £1,500 for the average haulier

Further Information

If you have any further related SME queries, please get in touch and we can give you tailored financial advice for your business. To find out what other support may be available for your business, please contact Paul Webb at hello@dixcartuk.com, or search ‘business support’ on GOV.UK.

If you own or work for a company with assets of £30 million or less, it may be able to offer Enterprise Management Incentives (EMI).

Companies can grant employees share options, up to the value of £250,000 in a 3-year period. Employees will not need to pay Income Tax or National Insurance if they buy shares for at least the market value of the shares when granted the option.

EMI Share Schemes is a Government approved, tax beneficial and very flexible way of incentivising key staff members. This guide outlines some of the most common options within the scheme to do this, from the Growth Share Scheme to the Phantom Share Scheme.

Click here to download the complete guide.

Companies that work in ‘excluded activities’ are not allowed to offer EMIs. Excluded activities include:

• Banking
• Farming
• Property development
• Provision of legal services
• Ship building

For further information on EMI Share Schemes, please contact Paul Webb, or email hello@dixcartuk.com.

The tax card outlines the business and individual tax rates for the tax year of 2022/23. All the essential tax facts, rates and figures are provided in one handy PDF, offering an easy point of reference all year round.

>> Download Now

R&D Tax Relief is a UK Government backed incentive designed to encourage innovation and increase spending on Research and Development activities for companies operating in the UK.

For SMEs:

• A deduction of 230% of the amount spent on R&D can be made from taxable profits, reducing the corporation tax due.

For loss making companies:

• The scheme allows up to 33.35% of a company’s R&D spend to be recovered as a cash repayment.

However, claims are often overlooked.

Business owners often; over-estimate the level of innovation that is required in order to claim, don’t know about the relief, or simply suspect that it is too good to be true!

To find out; what qualifies, how R&D tax relief is calculated and how to apply, please see: R&D Tax Credits

The reintroduction of the Statutory Sick Pay Rebate Scheme (SSPRS) means that employers with fewer than 250 employees will be able to claim up to two weeks’ SSP per employee for COVID-related sickness absences occurring from 21 December 2021.

Employers will be eligible for this support if they:

• are UK-based;
• employed fewer than 250 employees on 30 November 2021;
• had a PAYE scheme at 30 November 2021; and
• they have paid their employees’ COVID-related statutory sick pay (SSP).

The scheme will cover COVID-related sickness absences occurring from 21 December 2021. There are no details indicating when the scheme will end other than the government will keep the scheme under review.

If an employer made a claim for an employee under the previous scheme, they will be able to make a fresh claim for a new COVID-related absence for the same employee of up to two weeks.

As a reminder, employers must keep records of SSP that they have paid and want to claim back from HMRC. The following records supporting the claim must be kept for three years after the date the employer receives the payment:

• the dates the employee was off sick;
• which of those dates were qualifying days (ie, the days that the employee would normally work);
• the reason they said they were off work due to COVID-19;
• the employee’s national insurance number.

Claims can be made directly by the employer or we can make claims on behalf of our clients. 

If you require additional information on this topic, please contact your usual Dixcart adviser or speak to Paul Webb in the UK office: advice.uk@dixcart.com.

It is well known that, under current proposals, the sale of cars fuelled wholly by diesel or petrol will be banned by 2030 but perhaps less well known is that a ban on the sale of hybrid cars is then set to follow from 2035.

For business owners and employers who provide their employees with company vehicles there are some substantial tax benefits on offer in the next few years for making the switch to pure electric.

Tax Relief on Acquisition

Businesses that want to buy a zero emissions or electric vehicle can benefit from a 100% corporation tax relief on the purchase price in the year of purchase – provided that the car is new and unused

This is a particularly attractive incentive for owner-managed companies, especially where the company director might be looking for a new electric car for themselves.

If the business leases the vehicle, then the lease payments for an electric car are fully deductible against tax for the employer, although VAT recovery is limited to only 50% of the VAT cost, where the vehicle is used privately by the employee.

Tax Cost for the Employee

Whether the car is bought or leased, the other major benefit of switching to electric – for both employee and employer – is the drastically reduced benefit in kind (the amount on which tax and employer’s NIC is payable).

The percentage for diesel and petrol cars increases the more polluting they are and can go as high as 37%. In contrast, for 2022/23, the percentage for an electric car is a very modest 2% – resulting in a much lower value for the taxable benefit in kind. This results in savings of income tax for the employee and Class 1A NIC for the employer.

Another advantage is that it is still possible for an employee to give up salary for their vehicle via salary sacrifice, without being caught by the Optional Remuneration Arrangements (OpRA) rules. These rules mean that when an employee gets a choice between an amount of salary or a benefit, they are usually taxed on the higher of the cash equivalent of the benefit or the salary forgone. But where the employee gives up some salary for an electric car then the employee can still only pay tax on the cash equivalent of the benefit in kind if this is less than the salary given up.

Fuel or Should that be Charging Up ?

There are also incentives for employers to provide workplace charging facilities so that employees can benefit from the convenience of charging while they are at work.

An employer paying to install electric charging equipment can claim 100% of the cost as a first-year allowance – again receiving immediate upfront tax relief – and they can also recover the VAT where the equipment is installed at their business premises.

There is no benefit in kind for the employee if they charge their company car up at the work premises – even if they then use that charge for private miles. This again compares very favourably to the position where an employee provides diesel or petrol for private use, where the benefit in kind cost for private fuel can be very expensive.

In fact, there is no benefit in kind applied to any employee who can charge up at, or near their workplace, even if the car is the employee’s own electric car rather than a company one, provided the facilities are available to all employees.

Time to Act?

At the present time, the favourable tax treatment as set out above, is set to run until March 2025.

However there is no guarantee how long these benefits will be retained so if employers want to take advantage of them, they should consider doing so sooner rather than later.

If you require additional information on this topic, please contact your usual Dixcart adviser or speak to Paul Webb in the UK office: advice.uk@dixcart.com.

Background

UK tax resident, non-domiciled, individuals who are taxed on the remittance basis, are not required to pay UK income tax and/or UK capital gains tax on foreign income and gains, as long as these are not remitted to the UK.

It is, however, crucial to ensure that this tax benefit is properly claimed.  Failure to do so  means that any planning undertaken by the individual might be ineffective and he/she might still be taxed in the UK, on a worldwide ‘arising’ basis.

For more information on domicile, residence and the effective use of the remittance basis please see Information Note 253.

Claiming the Remittance Basis

Taxation under the remittance basis in most cases is not automatic.

An eligible individual must elect this basis of taxation on his/her UK self assessment tax return.

If this election does not take place, the individual will be taxed on the ‘arising’ basis.

How to Claim the Remittance Basis on a UK Self Assessment Tax Return

The taxpayer must claim the remittance basis in the appropriate section of his UK self assessment tax return.

Exceptions: When You Do Not Need To Claim

In the following two limited circumstances, individuals are automatically taxed on the remittance basis without making a claim (but can ‘opt out’ of this basis of taxation if they wish to do so):

• Total unremitted foreign income and gains for the tax year is less than £2,000; OR
• For the relevant tax year:

• they have no UK income or gains other than up to £100 of taxed investment income; AND
• they remit no income or gains to the UK; AND
• either they are under the age of 18 OR have been UK resident in no more than six of the last nine tax years.

What Does this Mean?

Mr Non-Dom moved to the UK on 6 April 2021.  Prior to moving to the UK he researched “uk resident non-doms” online and read that he should be able to live in the UK on the remittance basis of taxation.

He therefore realised that if monies from the £1,000,000 bank account that he already held outside  the UK were remitted to the UK, these monies would be tax free.  He also realised that £10,000 of interest and £20,000 of rental income that he had received from an investment property outside of the UK would also benefit from the remittance basis and not be taxed in the UK.

He did not feel he had a UK tax liability and therefore did not correspond at all with Her Majesty’s Revenue &  Customs.

He did not formally claim the remittance basis and therefore the full £30,000 of non-UK income (interest and rental) was taxable, in the UK.  Had he properly claimed the remittance basis, none of it would have been taxable. The tax cost was significantly higher than the cost of filing a tax return.

Summary and Additional Information

The remittance basis of taxation, which is available for non-UK domiciled individuals, can be a very attractive and tax efficient position, but it is crucial that it is properly planned for and formally claimed.

If you require additional information on this topic, further guidance regarding your possible entitlement to use the remittance basis of taxation, and how to properly claim it, please contact your usual Dixcart adviser or speak to Paul Webb or Peter Robertson in the UK office: advice.uk@dixcart.com.

Background

Once it has been decided that the UK is the correct location to establish a business, the next key decision is how this should be structured. One of the most popular structures is a limited company.

Recruiting high quality staff is also a priority and the availability and tax efficient nature of UK share option schemes can help achieve this objective.

Situations Where a Limited Company is Most Appropriate

Limited companies can offer a number of advantages.

They can be of particular benefit where:

• The business is being set-up with other people;
• There is a wish to incentivise staff though share schemes;
• The company will be receiving external funding;
• The company will be claiming Research and Development tax relief (R&D).

Forming a Company in England & Wales

The company formation process is relatively quick and easy.

All you need to start a company is an address within England & Wales for the registered office, at least one shareholder and at least one director (these two may be the same person). There is no minimum initial cash investment and the company can be formed in a matter of hours.

Why Use a Limited Company?

The main benefit of a limited company is the limited liability of the company’s officers and shareholders. This means that unlike the situation of a ‘sole trader’ or ‘partnership’ personal assets are not at risk in the event of a failure of the business.

Other considerations are:

• The company has a legal existence separate from its management and its members (the shareholders).
• The company’s name is protected.
• The company continues despite the death, resignation or bankruptcy of the management and/or members.
• The interests and obligations of management are defined.
• Appointment, retirement or removal of directors is straightforward.
• It is an easy process to gain new shareholders and investors.
• Employees can acquire shares.
• Companies are often perceived as more robust and more business-like than sole traders.
• Companies can provide tax advantages such as lower tax rates, R&D incentives, extraction of profits via dividends, etc.

Recruiting and/or Incentivising Employees Using Share Schemes

Finding the right calibre of staff is vital to the success of a business, wherever it is located.

Employers in the UK often use share schemes to recruit important members of staff and as a way of incentivising employees to work hard and remain with the business for the medium to long term.

There are a number of ways to do this, as detailed below. The most popular is the Enterprise Management Incentive (EMI) share option scheme as it is particularly tax efficient:

Enterprise Management Incentive (EMI)

Eligible companies frequently use an EMI share scheme, because the tax advantages are attractive. The EMI share option scheme is Government approved, tax beneficial and a very flexible way of incentivising staff.

Under the EMI scheme, options are issued over an agreed number of shares. No tax is paid when the option is granted. When the option is exercised, which means converted into shares, there is no tax to pay provided that the agreed exercise price is no lower than the market value of the shares on the day that the option was granted.

When the shares are sold, the capital gain is usually taxed at 10% in situations where ‘Business Asset Disposal Relief’ (previously known as Entrepreneurs Relief) is available.

Growth Share Scheme

Where companies cannot use EMI, a growth share scheme is often used instead. This type of scheme is not appropriate for a start-up, it is only relevant to an established company.

Under this share scheme, on the sale of a company employees benefit only from the growth in the value of the shares, not the historic value built up until the date of the share issue. This is achieved by valuing the company and then issuing shares of a different class, which only benefit from value generated above an agreed threshold.

For example, if the company is worth £10m, a growth share scheme may allow holders to share in the proceeds, only if they exceed £12m. The value of the growth share, on issue, would be low because it would not have the ‘right’ to any of the value built up previously. Income tax charged on acquisition of the shares would consequently be low.

Phantom Share Scheme

A phantom share scheme is essentially a cash bonus scheme.

This arrangement allows an individual to receive a cash payment equal to the value of shares, or the increase in value of shares, above a notional exercise price. No actual shares or share options are issued. The idea is that individuals are incentivised because the level of any payment is linked to an increase in the value of the company’s shares.

Additional Information

If you would like additional information regarding setting up a company in the UK and using a share scheme to recruit or incentivise staff, please speak to Paul Webb or Sarah Gardner at the Dixcart office in the UK: advice.uk@dixcart.com

The Dixcart office in the UK has extensive expertise in forming UK companies, establishing the most appropriate corporate structure and meeting all relevant compliance obligations. Dixcart UK is also experienced in building EMI schemes to meet specific needs and liaising with the UK tax authorities (HMRC), to gain advance approval and for the drafting of relevant share option agreements.

We are seeing an increasing number of cases where individuals are unaware of the new reporting regime for capital gains on property disposals as it seems that estate agents and solicitors are failing to alert them to the new requirement.

What has changed?

The change came in on 6 April 2020 and means that where the disposal of a residential property results in a gain, this must be reported to HMRC within 30 days following the date of completion and the tax due must be paid over by the same date.

This is purely a timing difference, as the gain would otherwise have been reported on an annual tax return and the tax paid over to HMRC by 31 January following the tax year in which the disposal occurred. The law has not changed any of the rules in relation to which gains are taxable or the rate of tax that is payable. The only difference is that the deadline has been brought closer.

However, if the deadline for filing the capital gains tax UK property disposals return is missed, an automatic £100 penalty will be charged. Further penalties of £10 per day are applied if the return is still outstanding after three months.

What disposals are caught?

The new reporting regime catches any disposals of UK residential properties that result in a gain. Therefore, disposals of overseas residential properties are not caught (although there may be requirements in the overseas jurisdiction) and neither are UK residential property disposals that result in a loss. Instead, these disposals are to be reported on an annual tax return as normal.

This also means that if the gain is fully covered by a capital gains tax relief, it is not caught. An example of this might be a disposal of an individual’s main home, which is fully covered by principal private residence relief.

However, it would apply to the disposal of a UK second home or a UK-let property, whether or not an individual lived in that property at some point.

It is important to understand that the rules do not just apply to sales of property, they apply equally if someone were to gift a property (e.g. to an adult child) even though no money may have been received in exchange.

What should you do?

If you have disposed of a property which is caught by these rules and have not submitted the necessary filings to HMRC, please contact us immediately so we can help resolve this matter for you.

If you are in the process of disposing of a property or considering this, then as the deadline is tight, please do let us know so that we can ensure that all of the information can be gathered in time to ensure that any reporting requirements are met.

Please see a PDF regarding the new capital allowances which were announced at the Budget.

From 1 March 2021 HMRC will finally introduce the domestic reverse charge. The charge may be relevant for businesses supplying or purchasing building and construction services.

If supplying services, you will need to apply the reverse charge if the following statements are true:

• your customer is registered for VAT in the UK,
• payment for the supply is reported within the Construction Industry Scheme (CIS),
• the services you supply are standard or reduced rated,
• you are not an employment business, supplying either staff or workers, or both,
• your customer has not given written confirmation that they are an end user or intermediary supplier.

If purchasing building and construction services, you will need to apply the reverse charge if the following statements are true:

• payment for the supply is reported within the Construction Industry Scheme (CIS),
• the supply is standard or reduced rated,
• you are not hiring either staff or workers, or both,
• you are not using the end user or intermediary exclusions.

HMRC have confirmed that they will apply a “light touch” in dealing with any errors made in the first 6 months of the new legislation, to allow for difficulties faced while implementing the scheme.

For additional information, please contact Paul Webb: hello@dixcartuk.com.