Customs declaration deadline

A reminder that businesses must submit all export declarations through the Customs Declaration Service (CDS) by 4 June.

Businesses exporting goods have less than one month left to move across to the CDS, HM Revenue and Customs (HMRC) announced today.

Export declarations must be submitted through CDS from 4 June this year, when it replaces the Customs Handling Import and Export Freight (CHIEF) system for all trade declarations.

CDS provides businesses with a more user-friendly, streamlined system with greater functionality. It has been running since 2018 for import declarations and more than 117 million customs declarations have already been submitted through CDS.

HMRC is working closely with the border industry and directly contacting all declarants and traders to urge them to access the available support now and transfer over to CDS.

Businesses with customs agents should ensure their agent is ready to use CDS. Those without a customs agent must prepare to make their own declarations using software that works with the system.

Further information is available on GOV.UK, including the CDS toolkit and checklists, which break down the individual steps traders need to take. Traders can also subscribe to CDS alerts and access the free Trader Dress Rehearsal to practice submitting declarations.

New Companies House powers

The recently introduced Economic Crime and Transparency Act has gifted Companies House a range of new powers aimed at reducing exploitation by corporate entities to pursue illegal enterprise.

The aim of the new reforms are:

  • Introducing identity verification for all new and existing registered company directors, People with Significant Control, and those delivering documents to the Registrar. This will improve the accuracy of Companies House data, to support business decisions and law enforcement investigations.
  • Broadening the Registrar of Companies House’s powers so that the Registrar can become a more active gatekeeper over company creation and custodian of more reliable data, including new powers to check, remove or decline information submitted to, or already on, the companies register.
  • Improving the financial information on the register so that the register is more reliable, complete and accurate, reflects the latest advancements in digital technology, and enables better business decisions.
  • Providing Companies House with more effective investigation and enforcement powers and introducing better cross-checking of data with other public and private sector bodies. Companies House will be able to proactively share information with law enforcement bodies where they have evidence of anomalous filings or suspicious behaviour.
  • Enhancing the protection of personal information provided to Companies House to protect individuals from fraud and other harms.
  • Broader reforms to clamp down on misuse of corporate entities.

In addition to the above, the bill will:

  • enable businesses in certain situations to share information more easily for the purposes of preventing, investigating or detecting economic crime by disapplying civil liability for breaches of confidentiality for firms who share information to combat economic crime;
  • enable proactive intelligence gathering by law enforcement and strengthening the National Crime Agency’s Financial Intelligence Unit’s (FIU) ability to obtain information from businesses relating to money laundering and terrorist financing by removing the requirement for a pre-existing Suspicious Activity Report (SAR) to have been submitted before an Information Order (IO) can be made; and
  • focus private sector and law enforcement resources on high value activity, reducing the reporting burden on businesses and enabling greater prioritisation of law enforcement resource by expanding the types of case in which businesses can deal with clients’ property without having to first submit a Defence Against Money Laundering (DAML) SAR.

As more information on the detail of how these changes will impact SMEs, we will post further updates on this newsfeed.

Business rates relief in England

Business rates are a tax on non-domestic premises, including most commercial properties such as shops, offices, pubs, warehouses and factories. The money raised through business rates is used to help fund local services like the police, fire and rescue services.

Business rates are generally calculated by multiplying the rateable value of commercial premises by the business rates multiplier before any eligible reliefs are deducted. Business rates are treated differently in England, Wales, Scotland and Northern Ireland and the rates relief schemes vary across the UK.

In England, you may be eligible for business rates relief if your business is:

  • a small business
  • a retail, hospitality and leisure property – for example, a shop, restaurant, entertainment venue or hotel
  • the only business in a rural area
  • a charity or a community amateur sports club
  • a local newspaper

You may also be eligible for business rates relief if:

  • you own a property and it’s empty, partly empty or being refurbished
  • you make certain improvements to your property
  • your rates change by more than a certain amount at revaluation
  • you will get less small business or rural rate relief after 1 April 2023
  • you are in financial difficulty
  • your property is in an ‘enterprise zone’
  • your property is in a ‘freeport’
  • your property is a heat network

Local councils can also choose to offer business rates relief to businesses that benefit the local community or economy. Contact your local council to find out if this is available in your area and check if you are eligible.

Free management course for SMEs

The government has launched the new Help to Grow: Management Essentials course; a short online course with practical tips and resources for small business leaders.

It is based on the 12-week Help to Grow: Management Course and is suited for leaders of newer or smaller SMEs, or those who are looking to explore the principles of business growth and management before taking the next step and enrolling in the full course.

The government sees small businesses as a vital part of local economies across the UK and supporting them is crucial to delivering on the need to grow the economy.

2024 is nominated as the year of the SME and the government has pledged it will continue to support and engage small businesses, reaffirming their role as the engines of our economy. The recent launch builds on a raft of measures designed to help them meet their full potential.

Essentials is the latest addition to the extensive package of SME support announced by Government as part of the ‘Help to Grow’ campaign: a one-stop shop for SMEs. The Help to Grow site makes it quicker and easier for business owners to find the resources they need for every step of their growth journey from across government.

COVID Bounce Back abuse

The Insolvency Service has recently published information confirming that a total of 831 company directors were banned in 2023-24 for Covid support scheme abuse, up more than 80% on the previous year, and that the average length of director disqualification for Covid misconduct in 2023-24 was almost 10 years.

The Covid Bounce Back Loan Scheme was introduced at the start of the pandemic in 2020. It helped small and medium-sized businesses borrow between £2,000 and £50,000 at a low interest rate, guaranteed by the government. 

Businesses were entitled to a single loan of up to 25% of their turnover under the scheme. 

Individuals could only use the loans for the economic benefit of the business and not for personal purposes. 

Enforcement action taken against those that have abused the support schemes has ranged from companies being wound-up in court to criminal convictions, compensation orders and director disqualifications. 

The Insolvency Service has successfully applied to have 1,430 directors banned for abusing Covid support schemes since it started investigating potential financial wrongdoing in this area in 2021. 

Settling energy disputes

Business owners that are in dispute with their energy suppliers will be interested in the free support on offer from the Energy Ombudsman.

In a recent press release the Department for Energy Security and Net Zero confirmed the following:

“Businesses will get free support to resolve issues with their energy contracts, as part of government and Ofgem changes to tackle cowboy practices like hidden fees, inaccurate energy bills and pressurising sales tactics for energy contracts.

“Small organisations with fewer than 50 employees will be entitled to free support from the Energy Ombudsman on disputes with their energy supplier. It will extend the service to cover 99% of all businesses in Great Britain, giving them the confidence to grow – as part of the government’s long-term plan to boost the economy and improve economic security for all.

“The Ombudsman has the power to order suppliers to provide compensation of up to £10,000 or take action to resolve issues – such as raising standards for their customers, or to credit or amend customer accounts.

“The move will also enable businesses and other organisations to settle disputes with their energy broker via the Ombudsman, without the need for costly legal proceedings – as part of changes set out by the government and Ofgem today. It is a first step in a crackdown on rogue energy brokers targeting small organisations with thousands of pounds in hidden fees.

“Energy Affordability Minister Amanda Solloway has warned energy brokers to end these unacceptable practices, with the government planning to consult later this year on regulating brokers and other third-party intermediaries.”

What do we mean by profit?

When most business owners refer to business profits, they are likely to mean the difference between sales and costs, and more concisely, that sales exceed costs.

However, the word “profits” can prove to be a moveable feast as HMRC, banks and traders will likely have a different interpretation.

For example, do costs include:

  • intangible overheads like depreciation;
  • the write-off of goodwill; or
  • taxation.

The distinctions can prove to be important especially if comparisons are being made for benchmarking purposes – comparing the results of a business with the results for the relevant industry sector.

Company accounts display sales, costs, intangible write-offs and corporation tax charges, but any dividends taken by directors as part of their remuneration package – most directors of small companies take low salaries and high dividends to save NIC costs – are not deducted as a cost in the Profit & Loss account. And so reported profits after tax are not the complete story; any dividends taken by working directors need to be considered as these will reduce retained profits.

The question, what is profit, is therefore dependent for its usefulness as an indicator of a businesses’ health, only if its definition is fully appreciated.

To register or not to register

In the recent Spring Budget, the VAT registration threshold was raised to £90,000 (previously £85,000) which means that smaller businesses that did not want to register for VAT, now have an additional £5,000 of turnover they can make each year without needing to register for VAT.

Obviously, if you sell goods or services to other businesses, and they are likely to be registered for VAT, if you are eventually required to register you can do so without changing your price structure; clients can simply claim back the VAT you have added to their bills.

But problems arise if you sell to non-business customers who cannot claim back VAT.

Once your business breaches the £90,000 turnover threshold you will be faced with two choices:

  1. Reduce your prices so your customer pays no more for your services. For example, if the pre-VAT price was £120, following registration, you would need to reduce your price to £100, which plus VAT at 20% would equal £120. Unless you could increase your sales volume, this would have a serious impact on your profitability.
  2. The second choice would be to pass on the VAT to customers. In this case your price would stay at £120, but you would need to charge customers £144 (£120 plus 20% VAT). Unless the goods or services you were selling had limited alternative suppliers, this price hike will likely reduce your sales and profitability.

So, although welcome, the rise in the VAT registration threshold to £90,000 will not overly excite traders who are grappling with the need to increase prices already, to counter inflation, and cope with rising costs.

Traders caught in this do I register or not conundrum do have choices, but they require serious consideration. If you need help to consider your options, please call.

We are unpaid tax collectors

Clients often refer to the VAT added to supplier invoices as if it were a cost to their business regardless of their VAT position.

This is true if you are not registered for VAT, you do not have to add VAT to your sales and you cannot recover any VAT you pay on purchases. Under these circumstances, VAT is a cost.

If you are registered for VAT, cash you collect from your customers will include VAT – if the sales are subject to VAT – and you will pay the VAT collected (less any VAT you pay on purchases) to HMRC. As you are collecting VAT from your customers, paying VAT on purchases to your suppliers and paying the difference to HMRC, there is no overall cost to your business.

Whilst there is no effect on our profitability if we are registered for VAT, if we have to pay over VAT added to our sales before our customers pay our bills then there can be a cashflow issue. Fortunately, HMRC allow traders affected in this way to use a special process called cash accounting for VAT. If you qualify for this method, you will only pay VAT added to your sales when your customers pay you, and conversely, you can only reclaim VAT on purchases when you have paid for them.

Consequently, those of us who are registered for VAT and are required to calculate and make returns to HMRC, are indeed unpaid tax collectors.

Time to rethink the credit you offer your customers

Most business owners are driven by sales targets and to meet these targets they may be tempted to offer extended payment terms.

For example, if your business grants a customer time to pay – say 60 days – after the services or goods supplied have been delivered, effectively, your money stays in their bank account for 60 days.

Further, if you have incurred costs regarding a sale, which have to be paid for before your customer settles their bill, you are out of pocket until your account is settled.

There is a well-worn cliché in business that cash is king. Business owners should keep a weather eye on the effectiveness of their efforts to turn a sale into cash in the bank. Amounts owed by customers may look like a useful buffer – cash to come in in future months – but you cannot spend or invest trade debtors.

Once you have made a sale, if you allow customers extended credit terms you are basically saying it is OK to leave your money in their bank accounts.

A further, major risk from offering over generous credit terms is over-trading. As mentioned above, if you have to pay for your goods and services on terms less generous than those you offer your customers, you will run out of spending power unless you have substantial cash reserves.

The next time you are tempted to extend credit in order to win a sale, take advice. We can help you consider the wider consequences of your sales strategy and its impact on cash flow.