Are you missing out on R&D support?

It’s a quite shocking statistic. According to new figures, the Treasury owes Britain’s small businesses more than £84bn in backdated research and development (R&D) tax relief.

Tax relief specialist Catax says that around 3.5 million small businesses are actively trading in the UK, with 57 per cent eligible for tax credits on R&D.
However, only around one per cent of small businesses have claimed the relief, meaning that approximately 1.96 million SMEs are owed money.

Catax says that means the Chancellor Philip Hammond is sitting on an “SME war chest” that is almost twice the annual budget of the Ministry of Defence.
As its chief executive Mark Tighe says: “The sum owed to SMEs is astounding when you think about what they could do with that money in the face of significant headwinds.”

It would suggest that much more work is needed to promote and explain to SMEs how the system works – and what actually qualifies as R&D.

When it comes to research and development (R&D) the image conjured up is of serious white coated scientists slaving over Bunsen burners in high-tech laboratories funded by blue chip corporations.
However, the reality is that companies in a whole range of sectors are actively involved in R&D and are investing time and cash on improving products or service. And that qualifies them for support.

That support is large. R&D tax credits are a form of corporation tax relief. Created by the government in 2000, they provide qualifying companies with very generous cash repayments– the average value of an SME claim stands at around £62,000, according to official figures.

So who is eligible for R&D tax relief? HMRC has set out some clear rules and guidelines.
It says your company can only claim for R&D tax relief if a “project seeks to achieve an advance in overall knowledge or capability in a field of science or technology through the resolution of scientific or technological uncertainty” – and not simply an “advance in its own state of knowledge or capability”.

The project must relate to your company’s trade – either an existing one, or one that you intend to start up based on the results of the R&D.
And if your company or organisation is claiming tax relief under the SME scheme it must own any intellectual property that might arise from the project.
It is not enough to say that a product is commercially innovative. You can’t claim in respect of projects to develop innovative business products or services if they don’t incorporate any advance in science or technology.

You can’t claim R&D tax relief under the SME Scheme if you’ve been subcontracted to do the work on behalf of somebody else.
It’s also worth pointing out that your project doesn’t have to be a success in order to qualify for the relief. The fact that it failed can be used to show that its work was genuinely pioneering.
However, if your company receives a subsidy or grant for an R&D project, it may affect how much tax relief you can claim.

To discuss the possibility of claiming R&D tax relief please contact me on 01772 430000.

Time to end the late payments crisis

THE Federation of Small Businesses (FSB) has warned that big companies must do more to end the late payments and “supply chain bullying” costing the UK economy billions.

FSB chairman Mike Cherry has written to the bosses of all FTSE100 companies urging immediate action.
He wants the big corporations to work with small businesses to help foster a new payments culture in the UK.

Research from the Blackpool-headquartered FSB shows the hugely damaging impact these practices have on small firms within supply chains.
It reveals that the vast majority (84 per cent) of small firms report being paid late, with a third (33 per cent) saying at least one in four payments they’re owed arrives later than agreed.
A similar number (37 per cent) have revealed that agreed payment terms have lengthened in the past two years, hampering their cash flow. Only four per cent say payment terms are improving.

FSB is calling for a non-executive director on boards “to be given a specific responsibility for good supply chain practice” including making sure the firm is opting to follow best practice and not just doing the absolute minimum or the best it can get away with.

Mike Cherry says: “The poor payment practices that run rampant through UK supply chains is a national disgrace with the country falling behind almost all other industrialised nations in our ability to pay small businesses on time.
“Some big businesses use inequality of power in business relationships to squeeze small suppliers and delay payments to improve their own cash flow. This is bullying, pure and simple.
“These practices are putting small businesses at risk forcing many to turn to personal credit cards or overdrafts just to survive.
“Sadly, we estimate late payments lead to 50,000 small businesses a year closing their doors, costing the economy £2.5 billion annually.
“Small businesses have the support of Secretary of State for Business, Energy and the Industrial Strategy, the Chancellor of the Exchequer and the Prime Minister in their mission to stamp out poor payment practices.
“The time has now come for big business to get on board with this mission and strive to be champions of good payment practice. My door is open to any business looking to work with small businesses to get this right.
“We can only end the late payments crisis and poor payment practices when we see a fundamental cultural shift in the boardrooms of big business, with those at the very top showing a willingness to address the issue and be accountable for their payment practices.”

  1. HERE ARE SOME TIPS TO HELP AVOID BAD DEBT PROBLEMS
    Know your client. When you take on a new customer check them out, get to know their financial situation, and their track record of payment. If they’ve left a previous supplier find out why. Take your time and be thorough.The Small Business and Enterprise Act 2015 and the Payment Practices and Performance Regulations were launched in April 2017. Larger companies are now required to publish twice-yearly the average time they take to pay invoices and the percentage not paid in the agreed terms.Suppliers can use the Payment Practices Reporting website (Check-payment-practices.service.gov.uk/export), to learn more about the reality of engaging in business with a larger firm.
  2. Get a signature. It is important to have proper Terms of Business in place. They should deal with payment terms in clear and precise terms – and set out your rights of remedy if payment is defaulted. Make sure your customers know your terms and get a signed acknowledgment from them that they have read and understood them fully. It pays to get help and advice when you are drafting them to make sure that your terms are enforceable.
  3. Chase debt early. Act with speed if you suspect a customer is in trouble. It can make all the difference in recovering what’s owed to you. Even if just one invoice is overdue consider if it’s in your company’s best interests to continue to work for them. You do not want to rack up the debt.
  4. Put procedures in place to recover bad debt. It’s vital that you have processes in place to chase what is owed to you. Some SMEs outsource this and it can be very effective for smaller businesses, putting distance between them and their client. A systems based process is vital to this, and experts will chase unpaid debts all the way to court action and enforcement if needed. It’s important to have this process in place because poor cash flow can threaten the future of your company.
  5. Consider court of insolvency procedures. These are the formal steps you can take if all else has failed to get what you are owed. Again look which is the best route to take – and one that gives you a realistic prospect of getting your money. If you get a successful judgement you still need to enforce it.

To discuss any aspects of this article please contact me on 01772 430000

Why family firms matter

A detailed new report has revealed the full extent of the massive contribution that family businesses make to the UK’s economy.

According the latest UK Family Business Sector Report, produced by Oxford Economics for the Institute for Family Business (IFB), they are responsible for a quarter of the nation’s GDP.

And that contribution has risen by £100 billion since 2010 to reach today’s impressive figure of £519bn. Over the same time the number of family-run enterprises has also grown by more than a million.

Family firms now account 88 per cent of all private enterprises in the UK, generating more than 12.2 million jobs – up by 2.3 million since 2010.
And that is not all. Family firms now turn over £1.4 trillion annually, up 7.2 per cent since 2010 – family business turnover has grown by more than that of non-family businesses since 2010.
They also contributed £149 billion in taxes in 2016 – more than the annual NHS budget.
These are large figures. And as Elizabeth Bagger, the Institute for Family Business (IFB) executive director, says: “Family businesses are the backbone of the UK economy – but their incredible contribution is still often underestimated.”

To ensure family businesses continue to flourish, she and her organisation are now calling on the government to support them with policies which allow them to plan and invest for the future.
Family businesses can be found in every sector today – from sibling start-ups to multi-generational international brands. And here in the North West WNJ is working closely with some fantastic success stories.

As this latest report underlines, family firms are a resilient and innovative part of Britain’s economic makeup, with a strong history of overcoming adversity and emerging stronger.
The fact that the tax contribution family businesses make each year is more than the annual NHS budget demonstrates just how growth in the sector benefits the economy, consumers, the exchequer and the millions who work in them.

Please contact me on 01772 430000 to discuss any issues relating to family business.

Powerhouse fund continues to drive growth

The new £400 million Northern Powerhouse Investment Fund (NPIF) continues to support growth – working to help businesses across the North West realise their potential.
And it is making a difference, with a number of Lancashire businesses of all sizes receiving funding packages to help their development.

NPIF has been set up by the British Business Bank in conjunction with the Lancashire Enterprise Partnership and nine other LEPs across the North.
Its main aim is to help businesses become a successful part of the Northern Powerhouse vision being promoted by the government
Sue Barnard, Senior Relationship Manager at British Business Bank, has spoken about the level of innovation taking place across Lancashire.
She added: “Through the help of our fund managers, we aim to support more high-growth SMEs in making their growth plans a reality.”
There are a wide range of funding options that the NPIF is making available for entrepreneurs, start-ups or SMEs.

The fund offers three different options designed to plug gaps in the provision of commercially available finance, ranging from £25,000 loans to £2m equity investments.
The first option being offered is microfinance – small business loans of between £25,000 and £100,000, aimed at new or growing businesses to support their working capital needs.
Then there is debt finance – business loans of between £100,000 and £750,000. This support is aimed at early stage or more established businesses that can demonstrate growth potential.
And finally there is equity finance on offer. This early stage and later stage equity funding of between £50,000 and £2m is for established businesses with ambitious plans or large start-ups with high growth potential.

The fund is also stressing that its investment packages are open to a wide range of sectors, from early stage innovative businesses through to manufacturing and creative and digital industries.
So, for businesses that can demonstrate growth potential, this may be the trigger that helps them scale-up. And it is well worth looking to see if your venture is eligible.

Financed by the European Regional Development Fund (ERDF), the European Investment Bank (EIB) and the UK government, NPIF aims to provide small and medium businesses with increased flexibility in the types of funding available.
It will work alongside the LEPs and Growth Hubs, as well as local accountants, fund managers and banks, to provide a mix of debt and equity capital to SMEs at all stages in their development.

To discuss any aspects of your business growth and funding, please contact me on 01772 43000.

Putting a price on intellectual property

Intellectual Property (IP) impacts every business in the country – and it is important to understand how it can be used to help an organisation grow and develop.

Businesses create and use intellectual property all the time, perhaps without realising it.

The value of your IP – whether it’s a trade mark, patent, design, copyright or trade secret – can far outweigh the value of your physical assets.
And it is just one of the important subjects being covered at breakfast gathering being organised in Lancashire next month.

It is being organised by the Association of Chartered Certified Accountants (ACCA) and the Institute of Chartered Accountants in England and Wales (ICAEW).
The event is aimed at bank staff, bookkeepers, accountants, business advisers and those who play a role in helping businesses succeed.

The Intellectual Property Office (IPO) will be on hand to reveal the free tools available to help people understand the subject.
The IPO promotes innovation and growth by offering a vibrant programme of activities and informed advice and support to business.
Attendees will also find out about the role which Boost (Lancashire’s Growth Hub) plays in helping start-ups to large companies by providing access to funded programmes including mentoring, product development, staff training and accessing finance.

And The Department for International Trade and the local Chambers of Commerce will also offer an insight into the opportunities available to help businesses trade overseas.

Are you paying the minimum wage?

Almost 200 employers have been identified by the government this month for failing to pay the minimum wage to almost 10,000 workers.
And there are warnings that many more may face hefty fines and demands for back payment of wages in the coming months.

The Department for Business, Energy and Industrial Strategy (BEIS) released figures revealing that hospitality, hairdressing and retail were the worst offending sectors.
Charging staff for uniforms or expecting them to fund their own independently, failing to pay overtime and issues around travel expenses were just some of the reasons given for salaries falling below the threshold.

According to a BBC report, one national restaurant chain blamed “an inadvertent misunderstanding” of the rules on staff uniforms for its mistake.
The company said it had asked front-of-house staff to wear black jeans or a black skirt with their -branded top. This was considered as asking them to buy a form of uniform, “and so we should have paid them for it,” it said.

According to experts, unpaid breaks, requiring workers to arrive early for their shift and time spent in meetings could all lead to underpayment.
And in the hospitality sector, additional payments such as tips, service charges and premiums for unsociable working should not count towards staff wages.
The penalties for falling foul of the minimum wage, both financially and in lost reputation, can be high. Employers can be fined up to twice the total wage shortfall, subject to a maximum of £20,000 per worker.

In total 179 employers were fined £1.3m by the government for underpaying their staff. It is also worth noting that minimum pay rates will increase again on April 1.
And in its response to the Matthew Taylor Review of the gig economy the government has announced plans to give all workers the right to a payslip.
It says that will make it easier for 300,000 workers to check that they were being paid the legal minimum.

The government has also launched an awareness campaign for the new minimum wage rates.
And the National Living Wage will increase to £7.83 in April, according to Chancellor’s Philip Hammond’s Spring Statement delivered earlier this month.

The team here at WNJ can help you ensure compliance and avoid financial penalties and bad publicity, as well as giving you piece of mind.

To discuss any matters regarding payroll please contact me on 01772 430000.