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February has sprung upon us already! If you’ve set them, how are you progressing with your New Years Resolutions? It might be time to sit back and reflect and keep those goals in mind! We’ve brought you a mixture of COVID updates, Grants to consider, Exit planning and Cash this month. We’d love to hear your feedback.
HMRC HAVE PUT BACK TAX RETURN DEADLINE Normally self-assessment tax returns need to submitted by 31 January, otherwise there is an automatic £100 late filing penalty. Don’t panic however, as HMRC have recently announced that provided 2020/21 tax returns are received by the end of February, the late filing penalty will not be applied. Filing late will, however, extend the period during which HMRC may open an enquiry into your return.
YOU ALSO HAVE LONGER TO PAY YOUR PERSONAL TAX 2020/21 income tax, CGT, class 2 and 4 NIC liabilities normally need to be paid by 31 January 2022. However, HMRC have recently announced that provided the tax is paid by 1 April 2022, there will be no penalty, although interest accrues from 1 February 2022 at 2.75%. If you need longer to pay, then you will need to agree a payment plan with HMRC. PLANNING TO SELL YOUR BUSINESS IN 2022? Now that the economy is starting to recover, this could be a good time to think about selling your business. Remember that under the current capital gains rules, the first £1 million of an individual’s gains potentially qualify for a 10% rate of tax, provided business asset disposal relief applies. We can check whether or not you and other business owners qualify for this generous relief. Note that the £1 million limit applies to all disposals during an individual’s lifetime. If your business is worth more than £1 million, you might want to consider the transfer of shares to other family members, although they will need to satisfy the conditions for business asset disposal relief for at least 2 years prior to any sale. PASSING ON YOUR BUSINESS TO THE NEXT GENERATION If you do not wish to sell your business but are looking to reduce your involvement, you may be considering passing on your business to the next generation, or maybe your management team. Where you are passing on the business or some of your shareholding, there are generous tax reliefs that facilitate the transfer of ownership without tax charges arising. These tax reliefs are currently available on the transfer of a trading business although it may also be possible to pass on an interest in an investment business with careful planning. We can of course discuss your plans with you to ensure that you are able to take advantage of all available tax reliefs. WHAT ABOUT A MANAGEMENT BUY-OUT? If your family are not interested in taking over your business, have you considered selling the business to your management team? In a typical management buy- out the existing management would set up a new company which would then raise finance to acquire your current business, so this is essentially the same as a sale to a third party, except the management team will know quite a bit about your business already. They would still nevertheless need to carry out due diligence and require you to provide warranties and indemnities as in a third party sale. An increasingly popular alternative to the classic management buy-out referred to above would be to sell your company to an Employee Share Ownership Trust (ESOT). SALE OF COMPANY TO EMPLOYEE SHARE OWNERSHIP TRUST This alternative to the classic management buy-out enables the shareholders of a trading company to sell their shares free of CGT to a trust set up for the benefit of the employees. This has become more popular as an exit route since the lifetime limit for CGT business asset disposal relief (formerly entrepreneurs relief) was reduced from £10 million to just £1 million. This tax break has recently been used by the owners of a number of well-known companies including Richer Sounds and Riverford Organics, and is similar to the structure in place at John Lewis. Like business asset disposal relief, the company must be a trading company. The outgoing shareholders are only allowed limited participation in the company following the disposal of their shares. There are a number of other conditions that need to be satisfied. If you are interested in going down this route, contact us to discuss whether it would be suitable for you or your company. COMPANY BUY BACK OF SHARES AS AN ALTERNATIVE EXIT Another potential exit for shareholders would be for the company to buy back their shares. This would normally be taxed on the shareholder as a dividend unless certain conditions are satisfied resulting in the payment being taxed as a capital gain. Clearly CGT treatment is preferable as the rate could be just 10% compared to up to 38.1% on dividends. Consequently, HMRC need to be satisfied that the share buy-back benefits the company’s trade, and a large cash payment may be difficult to justify if that depletes cash flow. With careful planning it may be possible to stage the buy back over a number of years, but it is recommended that you get advance clearance from HMRC to confirm capital treatment. WHAT’S YOUR EXIT STRATEGY? Recently, we have been helping a number of our entrepreneur clients develop exit strategies. There are many issues to consider: When do you want to retire? Can the business to be sold to your employees? Is a trade sale more likely? Are there children involved? How much is the business worth? What needs to be done to enhance the value of the business? How long will it take? Do you want/need to stay on after sale or transfer? What are the tax consequences?   We work with some fantastic businesses from a corporate finance perspective and together we have tried and tested processes to help you enhance your business value in the future. If you would like to discuss your personal exit plans please do get in touch. ACCEPTING CRYPTO PAYMENTS With the growing popularity of crypto currencies, some businesses have started to accept crypto payments. Read our blog to find out more.
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CASH FLOW IS THE SINGLE MOST IMPORTANT ISSUE IN MY BUSINESS Do you agree? Most of our other clients do. In this economy CASH IS KING and managing your cash flow is more important than ever. If you are concerned about the future of your business then take some time to reflect on where you are and what could happen in the next few months. It is now vitally important for all businesses to plan ahead for a range of scenarios. Cash flow and business planning in these uncertain times may appear difficult but there are some practical steps you can take to minimise potential disruption to your business. Review your Budgets and set realistic and achievable targets for 2022. Get your employees involved in a discussion of likely trading conditions and get their input on reducing costs and maintaining revenues. Review and flow chart the main processes in your business (e.g. sales processing, order fulfilment, shipping etc.) and challenge the need for each step. Put extra effort into making sure your relationships with your customers are solid. Review your list of products and services and eliminate those that are unprofitable or not core products/services. Pull everyone together and explain the business strategy and get their buy-in.   We specialise in helping our clients manage their cash flow. We do this by preparing and updating detailed cash flow forecasts. We can also help you negotiate or renegotiate overdraft facilities and find specific funding to help you grow! Look out for our next event, where hopefully instead of a webinar we can bring you a seminar, all around Cash flow. THE INNOVATION CHALLENGE TBAT are bringing you ‘The Innovation Challenge’ which has been designed by our expert team to stimulate and support innovation in SMEs by leveraging the expertise of our unique partner network. They have four free-to-attend workshops, and a cash prize of £5,000 plus support from their partners in areas such as recruitment, marketing,
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RECOVERY LOAN SCHEME Applications for this loan have been extended and are now open until 30 June 2022. Launched on 6 April 2021, the Recovery Loan Scheme (RLS) provides financial support to businesses across the UK as they recover and grow following the coronavirus pandemic. You can apply to the scheme if Covid-19 has affected your business. You can use the finance for any legitimate business purpose – including managing cashflow, investment and growth. However, you must be able to afford to take out additional debt finance for these purposes. If your business has already borrowed from any of the other coronavirus loan schemes – namely: · the Bounce Back Loan Scheme (BBLS)
· the Coronavirus Business Interruption Loan Scheme (CBILS)
· the Coronavirus Large Business Interruption Loan Scheme (CLBILS) RLS is still open to you, although the amount you have borrowed under an existing scheme may in certain circumstances limit the amount you may borrow under RLS. At Autumn Budget 2021, the government announced that the Recovery Loan Scheme will be extended by six months to 30 June 2022, with the following changes applying from 1 January 2022: The scheme will only be open to businesses with a turnover not exceeding £45m per annum The maximum amount of finance available will be £2 million per business (maximum amount per Group limited to £6m) The guaranteed coverage that the government will provide to lenders will be reduced to 70% See: Recovery Loan Scheme – British Business Bank (british-business-bank.co.uk)   GRANTS Additional Omicron Additional Restrictions Grant (ARG) funding has been provided by Government to support businesses who have been severely impacted by the rise of the Omicron variant but are unable to access the Omicron Hospitality and Leisure Grant. The Omicron Hospitality and Leisure Grant (OHLG) is available to business ratepaying hospitality, leisure and accommodation businesses that provide in-person services. Businesses who can answer yes to the following three questions, and are included in the list of eligible businesses, are invited to apply for the OHLG using myAccount: Are you registered for business rates within Derby City? Has your business got a rateable value? Was your business trading on 30 December 2021?   SSP The coronavirus statutory sick pay rebate scheme is back open, to help support businesses where employees’ are off with coronavirus-related Statutory Sick Pay (SSP). If we look after payroll for you, then just make sure to let us know that’s its COVID related and alongside Payroll Sorted can support you with this. If you want to know more see the link here.     MEET KATIE
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