Government Measures and Business Compliance: Recent Updates and Enforcement Actions

Welcome to our round-up of the latest business news for our clients. Please contact us if you’d like to discuss how these updates impact your business. We’re here to assist you!

Could the VAT Annual Accounting Scheme be beneficial for your business?

VAT-registered businesses typically submit their VAT returns and payments to HM Revenue and Customs four times a year. However, HM Revenue and Customs also provide an Annual Accounting Scheme for businesses with a taxable turnover of £1.35 million or less. This article will explore what this scheme entails and why you might or might not want to consider it for your business.

How does the Annual Accounting Scheme work?

Here’s how the scheme generally operates:

• Eligibility: Businesses with an estimated taxable turnover of £1.35 million or less are usually eligible to join the scheme.

• Annual VAT Return: Instead of filing quarterly VAT returns, you only submit one VAT return annually, covering the entire accounting period, typically 12 months.

• Payments: Your business would make nine monthly or three quarterly interim payments towards its VAT bill annually. These payments are based on an estimate of the annual VAT bill.

• Adjustments: At the end of the accounting period, you deduct the VAT payments already made from the amount of VAT owed on the VAT return. If there’s a shortfall, you pay the remaining amount. If there’s been an overpayment, you can offset it against the following year’s liability or request a refund.

• Application: You apply through HMRC. Once in the scheme, you stay until you voluntarily leave or your business exceeds the turnover threshold.

Why might the scheme be beneficial for you?

There are several reasons why you might opt to use the VAT Annual Accounting Scheme:

• Reduced administrative work: You only have to submit one VAT return annually instead of four.
• Improved cash flow management: The predictable schedule of making fixed monthly or quarterly payments, rather than fluctuating payments each quarter, can aid in budgeting and financial planning.
• Less chance of a penalty: With just one VAT return to submit in a year, there is a reduced risk of missing a filing deadline, which could result in a financial penalty.
• Consistency in VAT reporting: If your business has relatively stable or predictable VAT liabilities, the scheme offers consistency in VAT reporting, simplifies compliance work, and reduces the need for frequent adjustments.

Why might you not want to use the scheme?

While the scheme offers benefits, there are reasons why it may not be suitable for your business:

• Potential overpayment: The monthly or quarterly payments are fixed in advance based on an estimate. If the actual VAT liability is lower than estimated, you will be overpaying VAT throughout the year, tying up funds that could be used elsewhere.
• Cash flow impact: While the scheme provides a predictable payment schedule, this may strain cash flow if you have fluctuating or seasonal sales.
• Lack of flexibility: If your sales significantly increase or decrease, there is limited flexibility in adjusting VAT payments throughout the year, potentially leading to a heavy final payment or cash flow issues.
• Loss of interest on overpayments: If you have an overpayment at the end of the year, no interest will be paid on the refund, whereas interest could have been earned by holding the funds elsewhere.

Whether the annual accounting scheme could work for you depends on your business. The scheme can offer significant benefits for some businesses, whereas others may find that traditional quarterly VAT reporting better suits their requirements. Would you like further assistance exploring the VAT annual accounting scheme or other accounting matters? Don’t hesitate to book a free consultation! Our expert team at Naseems Accountants is here to help you navigate through your tax obligations seamlessly. Contact us today for personalised guidance tailored to your business needs.

New Measures to Ensure Food Production Remains the Primary Purpose of Farming

To emphasise the critical nature of food production in farming, new measures have been introduced to limit the amount of land that can be diverted from food production under the Sustainable Farming Incentive (SFI).

The Department for Environment, Food & Rural Affairs (Defra) recognises that most farmers already prioritise food production. However, a minority have allocated more land than intended under the SFI. These changes aim to establish a better equilibrium between food production and environmental improvement.

According to the revised guidelines, SFI applicants will be restricted to allocating only 25% of their land to six SFI actions that involve removing land from direct food production. These actions, such as flower-rich grass margins and winter bird food provisions, are fundamental to sustainable farming practices but were initially intended for limited implementation.

Farming Minister Mark Spencer stressed the significance of food production as the primary function of farming, stating: “The six actions we are capping were always intended to be implemented on smaller areas of land, and these changes will help to maintain this intention and continue our commitment to maintaining domestic food production.”

With over 15,000 applications already submitted for SFI, the scheme’s popularity highlights farmers’ dedication to sustainable practices. Most land under the scheme remains dedicated to food production, with SFI incentivising more resilient and sustainable farming methods.

In addition to these measures, the government is introducing further initiatives to bolster food security, including establishing a UK-wide Food Security Index and committing to an annual Farm to Fork Summit. These initiatives aim to uphold the goal of producing at least 60% of the food consumed in the UK domestically.

Details regarding the timeline for implementing these caps will be provided in the coming weeks.

Source

How to Respond to a Cyber Incident

The National Cyber Security Centre (NCSC) has recently issued a guide aimed at CEOs, which is also pertinent to all business owners, detailing how to handle a cyber incident effectively.

Cyber incidents can manifest in various forms and often lead to financial losses, damage to reputation, legal ramifications, and disruptions to regular business operations. Examples include ransomware attacks, phishing scams, data breaches, or instances where an employee misuses their access, intentionally or inadvertently.

The immediate aftermath of a cyberattack can be daunting, requiring difficult decisions to mitigate the impact on your business, customers, and staff in the subsequent weeks and months.

The guide provided by NCSC assists businesses in understanding what steps to take at the onset and throughout an incident.

You can access a copy of the guidance here: NCSC Cyber Incident Response Guide for CEOs

CMA reviewing the deal between Vodafone and Three

Last year, Vodafone UK and Three UK announced a joint venture deal to bring their customers under a new, single network provider. As two significant providers of telecommunication services in the UK, this deal affects around 27 million customers. Many of these customers are businesses concerned with maintaining the cost and reliability of services.

The Competition and Markets Authority (CMA) has completed its initial Phase 1 investigation into the deal and has raised concerns.

The deal would effectively reduce the four mobile network operators in the UK to three, which could lead to higher prices and reduced quality for customers.

They have noted that Three UK is generally the cheapest of the four major operators, providing an essential alternative in the market. Healthy competition can keep prices low and provide an essential incentive for businesses to improve their services. Therefore, combining the businesses could reduce rivalry to the detriment of customers.

The UK also has several smaller ‘virtual’ network operators that use the networks of the four network operators. The CMA is concerned that combining Vodafone and Three will make it more difficult for these smaller operators to negotiate good deals, further reducing the options available to customers.

Vodafone and Three have made several claims about how their deal will benefit competition and investment, but the CMA feels there is insufficient evidence to support these claims.

Vodafone and Three have been given five working days to respond to the claims. Otherwise, the deal will be referred to a more in-depth Phase 2 investigation.

See: https://www.gov.uk/cma-cases/vodafone-slash-ck-hutchison-jv-merger-inquiry?

Payroll Reminder: Minimum Wage Rates Increase on 6th April

It’s crucial to note that the minimum wage pay rates are set to increase effective from 6th April 2024. Failing to adjust to these new rates could lead to penalties being imposed.

Below are the updated minimum wage payment rates:

If you need help with any aspect of your payroll . We offer a comprehensive range of payroll services for businesses, please don’t hesitate to book a free meeting. We’re here to help!

Source: Gov.UK – National Minimum Wage Rates

Payroll Reminder: National Insurance Rate Reduction from 6th April

Effective 6th April 2024, the 2% reduction in employee national insurance contributions will be implemented. Employees will now have 8% deducted, instead of 10%, from monthly earnings ranging between £1,048 and £4,189. A 2% deduction on earnings exceeding this amount will continue to apply.

Employers’ employer’s assurance rate remains at 13.8% on monthly earnings above £758.

It’s important to ensure that your payroll software is up to date so that you can accurately deduct the correct amount of national insurance from your staff. You may need to verify with your payroll software provider or update your software to ensure accurate calculations.

Please don’t hesitate to book a free consultation if you require any assistance with this or any other aspect of your payroll. We’re here to assist you!

Source: Gov.uk – Reduction to the Main Rates of Primary Class 1 and Class 4 National Insurance Contributions

Is Internal Audit-Only for Large Businesses?

In small and medium-sized enterprises (SMEs), where every decision carries weight, the significance of internal audits must be considered. However, internal auditing isn’t a luxury reserved for large corporations. It’s a vital tool that can aid SMEs in navigating uncertainties and mitigating risks. Here are six reasons why internal audit should be considered for your business:

1. Risk Management

Businesses of all sizes encounter various risks, from financial mismanagement to operational inefficiencies. Whether focused on finances or procedures, internal audit identifies risks early on. This allows proactive implementation of adequate controls and procedures to mitigate them.

2. Improve Business Processes

Internal audit doesn’t just identify problems; it offers valuable insights into your business processes. Through systematic reviews, internal auditors can pinpoint bottlenecks, streamline workflows, and enhance operational efficiency. Optimising the business reduces costs and enhances productivity, ensuring competitiveness.

3. Prevent Fraud

Fraud can significantly impact smaller businesses. Internal audits are crucial in detecting and preventing fraudulent activities by examining finances and internal controls.

4. Strategic Decision-Making

Internal audits provide business owners with reliable information and insights about the business, offering perspectives not readily apparent in day-to-day data. This information can elucidate patterns in business data or reveal hidden aspects of operations.

5. Adapting to Change

Regular assessment of processes and controls ensures the business constantly measures itself against evolving trends. This ongoing evaluation ensures agility and responsiveness to change.

6. Increase in Employee Responsibility

While employing a full-time internal auditor may not be feasible for smaller businesses, tasking employees to dedicate part of their time to internal audit work is often possible. Stepping back from day-to-day work heightens their awareness of risks and efficiencies, enhancing their responsibility.

In conclusion, internal audit is an invaluable tool for SMEs aiming to thrive in today’s competitive landscape. It facilitates proactive risk management, process optimisation, fraud prevention, informed decision-making, continuous improvement, and staff development. If you’d like to discuss your business and growth plans, book a free meeting. As experienced business advisors, we’re here to assist you.

Restaurant Owner Jailed as Government Continues Crackdown on Covid Bounce Back Loan Fraud

In a firm stance against loan fraud, Ilhan Kekec, the proprietor of a Turkish restaurant, has been sentenced to two-and-a-half years in prison.

Mr Kekec, who unlawfully applied for a £30,000 Covid Bounce Back Loan and subsequently attempted to dissolve his company without informing creditors, received his sentence at Isleworth Crown Court on Monday, 18th March.

Despite his new venture being able to trade for only three weeks before the Covid lockdown, during which it could not open, Mr Kekec falsely claimed a turnover of £125,000 for his business in his loan application.

Upon receiving the loan, he withdrew the cash to settle personal debts instead of reinvesting it in his business. Subsequently, in June 2020, Kekec applied to dissolve his company, citing the restaurant’s lack of economic viability. However, he neglected his statutory duty to inform the company’s creditors, compounding his offences.

Julie Barnes, Chief Investigator at the Insolvency Service, condemned Kekec’s actions: “Ilhan Kekec saw an opportunity in the early weeks of the pandemic to receive a Covid loan which he never intended to repay. His actions were thoroughly dishonest, and at no point did he ever own up to his crimes. He will now have the chance to reflect on his behaviour from behind bars.”

Kekec’s sentencing sends a clear message that the government will continue prosecuting those exploiting the Covid Bounce Back loan scheme.

Source: Gov.uk – Restaurant Owner Jailed for Abusing Covid Loan, Then Dissolving His Company