Banks have been accused of “pulling up the drawbridge” on lending to small businesses.

Research from the Federation of Small Businesses (FSB) shows that successful applications for finance among members have dropped to the lowest level on record.

Conversely, figures from the Bank of England show the annual growth rate of lending to big corporates has increased significantly since the start of the year.

The business body has now called for a culture change in financing and has warned that economic growth will be threatened otherwise.

It says large chunks of what is available are being used to cover cashflow problems, often caused by late invoice payments.

The FSB’s quarterly Small Business Index (SBI) show just 43 per cent of applications for finance have been approved and that just nine per cent applied in the first quarter of 2022. That is the lowest number since SBI records began.

Of those that applied, 61 per cent sought traditional overdraft or loan products, while a quarter applied for asset-based finance, such as invoice finance.

Of the few firms that were successful in securing finance, 42 per cent plan to use credit to manage cashflow as many were badly hit by late payment of invoices.

The majority (61 per cent) sought traditional overdraft or loan products, while 25 per cent applied for asset-based finance, such as invoice finance.

Other methods included smaller numbers seeking funds through peer-to-peer platforms (seven per cent) and/ or crowdfunding (five per cent).

How can businesses improve their chances?

Measures that might persuade lenders to provide finance might include:

Having a strong, concise and clear business plan

Producing well-managed balance sheets that show the business has been well run

Finding the right type of loan, like instalment loan, short term loan or line of credit

Having the ability to provide collateral for the loan

Your accountant will be able to provide advice and guidance.

Commenting on the survey, FSB national chair Martin McTague said: “Lenders pulling up the drawbridge for small firms will threaten our already faltering economic recovery.

“Businesses are born every day across the UK – many need funding to get off the ground, ensuring they reach a stage where they’re profitable and creating opportunities.

“A lot of those who’ve worked tirelessly to adapt, survive and thrive over lockdowns need finance too, empowering them to take their firms to the next level, driving our economic recovery and the transition to net zero in the process.

“A big chunk of what little finance is being accessed is being used to manage cashflow challenges as our late payment crisis worsens, rather than for much-needed investment and innovation.”

For advice on related matters please contact our expert team today.

Loans to small businesses drop to lowest level on record

An increasing number of people are filing their Self Assessment tax returns early.

HM Revenue & Customs have reported that nearly 66,500 filed their 2021 to 2022 return on the first day of the new tax year on 6 April 2022.

This number equates to 30,000 more people filing early compared to 2018, which HMRC says could help taxpayers benefit from:

An early rebate for any overpaid tax from the 2021 to 2022 tax year.

Spreading the cost via direct debit. They can set up a Budget Payment Plan service with HMRC to set up weekly or monthly direct debit payments.

Customers have been able to file their 2021 to 2022 Self Assessment tax return since 6 April. And while many wait until nearer the annual filing deadline on 31 January, for some it is an opportunity to beat the last-minute rush and get it done as soon as they can, while they have the relevant information to hand.

Customers can file their tax returns online, but tax matters can be complicated and it would be a wise move to make sure your accountant does this on your behalf.

Your tax return must be accurate in terms of figures, dates, your status and any relief you are eligible for.

Get it wrong or miss the filing deadline and you could incur penalties, which will increase if you delay in correcting the situation. That is where the accountant can take the stress away.

Myrtle Lloyd, HMRC’s Director General for Customer Services, said: “You don’t need to wait for the January rush to send us your tax return. More and more people are getting theirs out of the way early – search ‘Self Assessment’ on GOV.UK to get started.”

Earnings and payments received during the pandemic will need to be reported on the tax return meaning customers must declare 

any grants or payments from the COVID-19 support schemes

 received between 6 April 2021 and 5 April 2022 as these are taxable.

For help and advice on filing returns and other tax matters, contact our expert team today.

Thousands more taxpayers filing Self Assessment returns early

There has been a fall in investment of around 12 per cent in the Enterprise Investment Scheme (EIS), largely caused by the effects of the pandemic.

But that figure was slightly offset by a surge in the sister programme, the Seed Enterprise Investment Scheme (SEIS), which showed an increase of four per cent.

According to HM Revenue & Customs (HMRC), money invested through the EIS, which helps newer firms to find funds to scale up operations, decreased by that figure in the 2020/21 tax year.

The figures reveal that 3,755 companies raised funds under the scheme, which was 11 per cent down on the previous tax year.

The figures confirm a slowdown over the first three quarters of 20/21 tax year, which was the height of the pandemic.

The trend was reversed however, in the last quarter of the tax year, where it rebounded back to pre-pandemic levels. The upward trend is expected to continue as awareness and opportunities to access EIS funding increases.

Better news was the money invested through SEIS, which invests in earlier stage start-ups, was up four per cent, increasing to £175 million across 2,065 companies.

Under EIS, you can raise up to £5 million each year, and a maximum of £12 million in your company’s lifetime.

This also includes amounts received from other venture capital schemes. Your company must receive investment under a venture capital scheme within seven years of its first commercial sale.

The scheme rules must be followed so that investors can claim and keep EIS tax reliefs relating to their shares.

Tax reliefs will be withheld or withdrawn from investors if the rules are not followed for at least three years after the investment is made.

There are different rules for companies that carry out a significant amount of research, development or innovation, and either:

Want to raise more than £12 million in the company’s lifetime

Did not receive investment under a venture capital scheme within 7 years of their first commercial sale.

The Seed Enterprise Investment Scheme (SEIS) is a scheme designed to complement the EIS.

It helps companies raise money when it’s starting to trade. It does this by offering tax reliefs to individual investors who buy new shares in your company.

Firms can receive a maximum of £150,000 through SEIS investments.

However, because firms of this kind are riskier, there are two important differences:

You get a greater income tax break with SEIS than with EIS

With SEIS capital gains are not deferred: you can halve the capital gains tax you owe.

To be SEIS-qualifying, a firm must be small and unquoted, have traded for a maximum of two years, have gross assets of less than £200,000 and fewer than 25 employees at the time of investment.

As with EIS, some companies and sectors are excluded, including those dealing in land, commodities, or shares.

For help and advice on related matters please contact our expert team.

Enterprise investment rebounds strongly after being hit by pandemic

It is vital that companies keep on top of their payroll and tax liabilities, and a P11D form is another vital form that needs to be completed and paid correctly.

Here is all you need to know to stay on top of the P11D requirements, so you do not fall foul of the penalties for not correctly following the rules.

A P11D form is used to report items and services that employees receive that are part of their remuneration and have not been taxed through payroll. This includes perks such as company cars, health insurance, loans and shares.

These are known as benefits in kind, which essentially bump up an employee’s income. As a result, the employer may have to pay National Insurance contributions on them.

P11D forms for the 2021/22 tax year must be sent to HM Revenue & Customs (HMRC) by 6 July 2022. Class 1A National Insurance contributions then have to be paid in full by 19 July 2022.

It is important to ensure the form is submitted in time, as penalties can be incurred for late filing.

A P11D(b) form is used to declare the amount of Class 1A National Insurance contributions that are due for payment on the benefits in kind. It must be filed at the same time as the P11D form.

You can file a P11D online using payroll software, or businesses that have up to 500 employees can use HMRC’s PAYE Online Service.

It should be noted that some benefits in kind are processed through payroll so could be liable to Class 1 National Insurance contributions and income tax, so be sure to check this.

Do you need advice on P11D forms? For help on payroll and related matters, don’t hesitate to contact our expert team.

P11D forms: What do I need to know?

Unfortunately, fraudulent emails are something that we are all likely to come across at some point.

In fact, the methods that fraudsters are using to target people have seen a substantial increase in recent years.

It is important to be aware that your business could fall victim to a scam, with the potential of scammers going to the effort to pose as your business in order to trick employees into revealing personal information.

According to new research from OpenText Solution (a cyber security firm), on average, businesses have been targeted 28 times by cyber threats over the past year.

The research also revealed the worrying information that 42 per cent of UK employees are unable to identify fraudulent emails that appear to be from the Royal Mail.

With this rising number of threats, if staff do not have sufficient training on recognising scam emails, the security of your business’ data can be put at serious risk.

OpenText Solution recognised this lack of knowledge as a notable issue, with the majority of employees in the survey (60 per cent) not being aware of cyber security jargon, such as ‘BEC’ (referring to ‘business email compromise’).

Alongside having the relevant training on cyber security threats and how to respond to them, it may be useful to remind individuals how to recognise generic scams.

HM Revenue & Customs (HMRC) has offered some valuable advice on what to be wary of, including:

An unknown sender requesting personal information (such as bank details)

Correspondence demanding you to transfer money or enter card details

Unexpected messages offering a refund, tax rebate, or grant

It is imperative to be vigilant when it comes to virtual correspondence; for instance, it may be possible to recognise a scam from company names being misspelt and differences in logos.

If you are considering increasing the level of employee training to account for the increased cyber security threats, it may be worthwhile to seek advice on how to factor this into your business’ finances.

Need support with organising your business’ finances? Contact our experts today.

How can your employees recognise scam emails?

Discovery assessments look set to be applied to the High-Income Benefit Charge under new legislation set out by the Government.

A loophole regarding discovery assessments and the charge was brought to light following the case of HMRC V Mr Wilkes last year.

The case saw the Upper Tribunal agree that the assessment for the High-Income Child Benefit Charge (HICBC) was not validly raised, following the HMRC appealing an earlier decision in Mr Wilkes’ favour.

HMRC are now appealing the decision to the Court of Appeal, but the case has had an impact on tax legislation in a bid to close the loophole.

Ahead of the appeal, part of the Finance Act 2022 includes plans to change the discovery provisions retrospectively so they can now be applied to collect any underpayment of the High-Income Benefit Charge.

HMRC says the move will provide certainty that HMRC may recover HICBC through the issue of a discovery assessment.

So, are you aware of discovery assessments and the High-Income Benefit Charge? Make sure you brush up as the measure is introduced.

A discovery is a power held by HMRC to reopen closed periods if they believe there has been an underpayment of tax. They will then issue an assessment for the tax they think has been underpaid.

What it means for the High-Income Benefit Charge

The High-Income Benefit Charge is a tax charge for any individual who earns over £50,000 and either they or their partner receive Child Benefit or someone else gets Child Benefit for a child living with the individual.

The new rules clarify that those who are liable to pay the charge must notify HMRC, or risk HMRC recovering HICBC through the issue of a discovery assessment.

It is stressed on the government’s website that the measure “does not introduce any new or additional obligations or liabilities; it simply maintains the widely accepted and understood position that existed until recent litigation called this into question.”

Are you worried about a discovery assessment? For expert advice on related matters, do not hesitate to get in touch today.

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