Just as you don’t need a hammer to crack a nut, you don’t necessarily need to cease trading or liquidate your business if it is struggling.  We explore the other options available.

 Administration

If the directors choose to place a company into Administration, the directors essentially hand control of the company over to an Administrator (who must be a licenced insolvency practitioner).  In simple terms this is a kill-or-cure solution.  The Administrator will attempt to quickly stabilise the business and bring it back to good health. The Administrator then has a number of options as how to deal with the company. In rare circumstances where the Administrator makes significant profits or asset sales under Administration, the Administrator may pass control of the company back to the directors. More commonly, the Administrator will either work with the directors to agree a CVA (see below) to allow the company to continue in the longer term. If a CVA is not viable, the Administrator will likely look for a buyer for the business. If none of this options can be achieved, the Administrator will start the process to close the company down in an orderly fashion, usually completing any ongoing work, selling off assets piecemeal and making staff redundancies. A company can spend up to a year in administration before a final decision is taken on its future.

Pre-Pack Administration

A Pre-pack Administration is when a company enters Administration and where the Administrator, having already been involved behind the scenes, completes a very quick sale of the business once it enters Administration.  The business can be sold to a third party, such as a customer or competitor, or in many cases the buyer will be the existing owners or management.

The benefits of pre-pack Administration are that an Administrator can effect a sale quickly, before news of the company’s insolvency reaches the outside world, as this may reduce the value of the business, for example if orders are cancelled or if staff were to leave. Independent academic research has shown that pre-packs have saved many thousands of jobs and R3, the insolvency trade body, has advocated their place in the insolvency market when conducted properly.

However, the speed and secrecy of the pre-pack is the very reason that pre-packs have caused controversy in the past, since it has been argued that this means the business is not made available to the wider market to test what price might be achieved. Also, where a pre-pack sale is to directors or management, it appears that directors can walk away from debt and set up in the same business again the following day.

While there is a certain degree of truth to this, the onus is on the Administrator to justify why a full marketing campaign is either not preferred or not possible. To give creditors another level of comfort, there is also now a body set up by the Insolvency Service that reviews pre-packs before they place, to give an independent view on the Administrator’s judgment.

Company Voluntary Arrangement

A Company Voluntary Arrangement is a formal payment plan between a company and its creditors, which sets out how much the company can afford to pay back to creditors and over what timescale (usually 5 years).  In order to take effect, a CVA must be approved by at least 75% (by value of debt) of the creditors who vote.  As long as this is achieved a CVA can be put in place even if there are objections from the creditors holding the remaining 25% of the debt.

The directors retain control of the management of the company and the company pays a monthly sum to the insolvency practitioner, who will distribute the funds to creditors over the life of the CVA. Once the CVA ends, any balance still owed to creditors is written off.

Dissolution

If a company can afford to pay off its debts but does not have a future as a going concern, then it may be possible for the directors to apply to Companies House to have the company removed from the companies register in a process known as dissolution.  This might apply if, for example, a company finds itself struggling due to the departure of a key member of staff in a service-orientated business, or if a company’s only customer decide not to purchase from it any longer.

Dissolution does nothing to absolve the company of its existing debts, however all creditors of the company need to be notified of the dissolution application, and any creditor may object to the dissolution if they still have monies owed to them.

Leading Corporate Recovery specialise in providing practical and intelligent insolvency and business restructuring solutions. For free, confidential advice, get in touch with our team today.

 

Troubled economic times are often hardest on the people who were struggling to get by already.  Here are  tips to help you address the situation and decide if insolvency is the right course of action for you.

Understand exactly where your money is going right now.

Many jokes revolve around assumptions but in real life debt-management is a serious matter.  You may think you know where your money is going (and you may be right) but you need to know exactly.  Exactly in this instance means doing more than just looking at your bank statements (although that’s generally the best place to start) and seeing, for example, not just that you made a trip to the supermarket, but also knowing precisely what you bought at the supermarket – was every item a necessary purchase?  If you took out cash at an ATM, what did you spend it on?  You may need to spend a month or two on this exercise before you get a clear picture of  your spending habits.

Realistically compare your income with your essential expenses

The key word here is realistically.  Some expenses are fixed (housing, council tax, insurance payments…) and some are generally much the same each month (credit card repayments) but some can vary (grocery bills) and it can be tempting to try to reduce these drastically to repay debts.  In reality however, a financial plan which relies on you eating beans on toast 3 times a day, every day and sitting in the dark without heating of an evening, is unlikely to work as a long-term solution.  In simple terms, if your income is insufficient for you to pay your debts and have a decent, basic standard of living, then you need to make a change.  You either need to increase your income, find some other way of paying off your debts (e.g. selling assets until the debt is reduced to a manageable level) or consider an alternative solution, which could be anything from an Individual Voluntary Arrangement (IVA) through to a more formal option such as bankruptcy.

Draw up a realistic budget

Once you have understood your income and expenditure, create a budget which is realistic – it goes without saying that a budget will only help you if you are actually able to stick to it! Ensure you allocate enough cash to enable you to actually live but it is important to identify areas where you can cut back.

See if you can stop direct debits and pay manually

If you are struggling to keep control of your money then it can help to pay essential expenses when you receive your wages, even if this is before they are due.  That way you avoid the risk of spending the money on something else.  For example, if you get paid on the 28th and you have credit-card payments due on the 1st and 4th of the month, then you may wish to stop paying by direct debit and make manual payments on the 28th, when you get your wages.  If you do this for as many essential bills as you possibly can, then you know that the money which is left is all you have to spend for the rest of the month.

See what you need to do to get more affordable credit

If you have an impeccable payment history over the long term, then you may be able to get lower-cost financing, which will not only lower your monthly payments, but also reduce the money you pay back overall.  If you do not, then you may find that you need to clear up your credit record substantially before you are offered a better deal.

Consider alternative options

Thankfully in this day and age, there a wide range of solutions available to help people escape unmanageable debt. No matter how dire you feel your circumstances may have become, there are always options to help you get back on track. The key is to ask for help when you need it, before your debts spiral out of control. If you would like to have a free, confidential chat with our team, feel free to call on 0800 246 1845.

There are certain government departments which have the ability to strike an irrational fear into the hearts of the most rational of people.  HMRC is one of them, the Insolvency Service is another.  Should an investigation by either agency lead to a negative outcome, the consequences can be severe but it is worth remembering that these agencies are not out to trap people who have made genuine and minor mistakes.  They are looking for instances of deliberate and more serious wrongdoing.  Having said that, forewarned is forearmed and a little understanding can go a long way to relieving stress and fear, so here is a short guide to what directors need to understand about the insolvency service.

The Insolvency Service is a civil agency, not a criminal one.

If the Insolvency Service finds evidence of criminal activity, then it can pass this information on to the police, but in and of itself the insolvency service is unable to press charges under criminal law, which means that its investigation can only lead to civil (read financial or commercial) penalties rather than a prison sentence.

An investigation by the Insolvency Service can be triggered automatically

 If a company is placed into compulsory liquidation, then the Insolvency Service will automatically investigate the circumstances which resulted in this.  In essence they will look at the company’s financial history and analyse it to see if the directors acted reasonably in the context of what they could be justifiably expected to know at the time.  As a part of this process, they may interview company employees at any level (officers and directors are particularly likely to be asked to respond to questions) as well as external service providers such as lawyers and accountants.

There is a difference between lack of judgement and unfit conduct

As the old saying goes, hindsight is always perfect and there is nothing particularly unusual about an investigation determining that directors might have brought about a better outcome had they acted differently on one or more occasions, but this, in and of itself is not necessarily unfit conduct.  Unfit conduct essentially boils down to actions (or lack of actions) which are either obviously negligent or which amount to an individual feathering their own nest at the expense of others.  This is essentially the allegation currently being levelled at (Sir) Philip Green regarding his role in the collapse of BHS, hence the interest shown by MPs and other regulatory bodies.

Politeness and promptness are generally beneficial

 Generally speaking in life a smile opens more doors than a frown.  Whatever your opinion of the Insolvency Service and whatever your view of their investigation (and indeed of their representatives personally) the fact is that they have a job to do and any behaviour which hinders them from doing it, or which simply is discourteous to them personally, is likely to be, at best, water of a duck’s back and at worst could have repercussions for the individual in question.  It’s worth noting that lack of cooperation with an investigation can, in fact, be considered evidence of unfit conduct.  It’s also worth remembering that the sooner the investigators get the information they need, the sooner the investigation will be completed and, all being well, the sooner everyone concerned can get on with their lives.

Getting the right advice as soon as possible can make the difference between stress and serenity

While it’s generally fair to say that those who have nothing to hide have nothing to fear, it’s also fair to say that those who get the right advice are in the best position to get the best outcome for them, even if that’s something as (relatively) simple as just getting the investigation over and done with as quickly as possible.  If a company is starting to struggle, then it’s best to seek advice from an insolvency practitioner as soon as this becomes apparent, but, as the old saying goes, better late than never. If you are struggling to keep your business on track, contact our team today for a free, confidential discussion.

The word Brexit may not (yet) be officially included in the dictionary, but it’s certainly on the lips of a lot of people, including those in the UK’s manufacturing sector.   At this point manufacturers are waiting anxiously to see what, exactly, Brexit will bring which could be anything from a complete, acrimonious (and potentially expensive) divorce, to a seamless transition into the European Free Trade Area, which would leave the UK in a similar situation as it was prior to Brexit.  Here is Jamie Playford’s take on the key points on which this industry urgently needs clarity.

Access to the single market

This is possibly the single biggest issue related to Brexit.  Manufacturers are nervous about the possibility of a trade war between the UK and its erstwhile EU partners.  While opinions vary as to whether or not this would cause more damage to the UK or to the EU, the fact is that getting into fights is generally best avoided for many reasons.   Manufacturers appreciate access to the single market not only because it eliminates the need to pay tariffs, but also because it offers simplicity and lack of bureaucracy, since it removes the need to provide customs documentation.   This is, of course, helpful for straightforward and quick order processing.

Capital investment

Modern factories would be pretty much unrecognisable to someone who had jumped forward in time from the period of the industrial revolution.  Although manufacturing may not move as quickly as the high-tech world, factories are in a continual state of development, which requires up-front capital investment.  This investment will only be made if the investors have reasonable expectations of receiving and appropriate return on their money.  In short, it requires investor confidence.  While this may be an intangible concept, it has very real importance in the everyday world.

The pound

There are pros and cons for a strong pound as there are for a weak one.  A strong pound can make exports more expensive, but it can also make it cheaper to import raw materials, thereby reducing the cost of manufacture.  A weak pound by contrast makes it more costly to import materials but can help to keep exports more affordable in relative terms.  In either case, where there is stability, manufacturers can adapt to whatever the new reality turns out to be.  Where the pound fluctuates constantly, however, it’s hard for manufacturers ever to be really sure where they stand.

Interest rates

High interest rates are good news for savers but high returns on savings can act to discourage capital investment.  If the Bank of England is forced to put up interest rates to satisfy investors in government bonds then manufacturers may struggle to get the financing they need to invest in their business (or to pay interest on their own borrowing).  Again, fluctuating interest rates are horrendous news for manufacturers, who need to plan over the long term and therefore benefit hugely from stability.

The availability of labour

For all of the possibilities offered by automation and artificial intelligence, there is still a need for human workers.  If the labour pool shrinks (due to restrictions on immigration), the cost of labour may go up, thus creating an additional burden for manufacturers.

As has been pointed out so often recently and as we have previously mentioned, the specifics of Brexit are far from decided.  For the time being, manufacturers are recommended to channel their energies into reviewing the overall state of their finances and the health of their business.  We are able to provide comprehensive guidance on how best to steer a business in these turbulent times especially as one of the few points on which directors can be relatively certain is that it is highly unlikely that Brexit will relieve them of their responsibilities with regard to the ethical management of a business and specifically of continuing to trade when insolvent.

 

Unsurprisingly, one of the first questions we are asked by the directors of a struggling business is “how much is an insolvency procedure likely to cost”? Headline insolvencies such as those at Zavvi, Woolworths and Lehmans can give the impression that insolvency is an expensive way of winding down a business. While it’s true that there are costs involved, these costs are relative to the amount of work required and it’s highly unlikely that the effort needed to wind up an SME is likely to be in any way comparable to the effort required to wind up a major corporation. Here are a few points to consider when looking at the potential cost of insolvency.

1. The cost of not declaring insolvency

When looking at the advantages and disadvantages of taking a particular course of action, it can often be helpful to look at the costs of the alternatives. In simple terms, continuing to trade when a business is effectively insolvent can leave directors open to expensive liability proceedings at a later date. It can also mean that a situation goes from bad to worse, making it even harder (and more expensive) to deal with when this becomes unavoidable.

2. Some of the fees paid to IPs relate to mandatory regulatory compliance

Insolvency is fundamentally a process, which a skilled IP will manage to achieve the best resolution possible for their employer. As part of this process, there are certain steps which must be followed in order to comply with the law. For example, IPs have a legal duty to investigate the behaviour of directors to ensure that there was no evidence of malpractice on the part of the directors. The case of BHS and Sir Philip Green is a timely example of how previous company directors can be held up to scrutiny regarding their actions in the run up to the insolvency.

3. IPs’ fees depend on a variety of factors

It’s close to impossible to give any kind of “one-size-fits-all” estimate of IPs’ fees. The reality is that these fees can vary according to a number of factors. These can include: the number of staff involved and their seniority; the number of hours worked; the complexity of the case; whether the case exposes them to personal danger; the geographical area in which the IP works and the type of company with which they are dealing. For those who may be raising an eyebrow at the comment about personal danger, it’s worth remembering that IPs deal with situations where people are almost certainly going to lose their jobs and that can be a very traumatic situation which needs to be managed with care.

4. A single IP often undertakes many different jobs

Depending on the nature of the specific insolvency case, a single IP may act as an Officer of the Court, a supervisor of a voluntary arrangement, a Trustee, an administrator and/or a liquidator. In addition to all of this, IPs appointed by the directors of a company will generally aim to give as much help and advice as they can with regards to ensuring that the directors are protected from any future liability, whereas those appointed by creditors will often be very motivated to look for any opportunity to make directors personally liable for any money owed to the creditors who employ them.

5. IPs can charge their fees according to different methods

There are basically three methods on which IPs can base their fee. They can charge by the hour (time costs); they can charge a fixed fee or they can charge a percentage of realisations. There is a requirement for IPs to confirm their fee structure in writing so there are no nasty surprises further down the line.

At Leading, we ensure that fees are always discussed in advance and aim to offer flexible payment arrangements when required, meaning you can access expert advice when you need it the most.

It’s the final countdown to what will indisputably be a historic moment.  Assuming that the vote leads to a Brexit, what would that mean for SMEs?

Compliance and Other Regulations

Red tape is the bane of many a business owner and tends to be particularly onerous for SMEs.  On the one hand, being in the EU means that business across Europe are, by and large, working to a single set of rules.  On the other hand, Brexit would potentially give the UK government scope to simplify those rules without being bound by the requirements of the EU.  Having said that, if the UK still wants access to the single market, for example through the European Economic Area/European Free Trade Area (EEA/EFTA) then it may still need to comply with EU regulations.  Even if it didn’t, it is an open question as to whether a UK government would simplify the regulations which are already in place.

Access to the Single Market

This has been one of the most contentious points of the referendum.  To clarify, if the UK were to leave the EU then trade with the EU would continue under World Trade Organisation (WTO) rules.  While the Remain campaign has pointed out that the UK would have to try to negotiate access to the single market, for which concessions would be expected, the Leave campaign has pointed out that the UK is also a major export market for other European countries and that it is therefore in the interest of other EU member states to negotiate free-trade agreements with the UK.  What would happen in reality remains to be seen (potentially), however it seems reasonable to conclude that trade with the EU will continue in one form or another.

Labour Pool/Customer Base

These are essentially two sides of the same coin.  Citizens of other EU member states can currently live and work in the UK on an equal basis with locals.  This provides a workforce and of course, while they are here, they need goods and services, this provides a customer base.  What would happen to these EU immigrants in the event of a Brexit is an open question.  If the UK wished to join the EEA then it would have to allow the free movement of people and goods, in which case there is a distinct possibility that it would be business as usual from the point of view of EU immigration.  On the other hand, if the UK negotiates distinct free trade agreements, which do not require it to allow the free movement of people, then these immigrants could be forced to leave the UK (or to apply for employment visas).  At the same time, however, people from the UK living in other parts of the EU would potentially have to return to the UK, which could help to counterbalance this exodus.

Customer Confidence

This is hard to define let alone to measure, but it is nevertheless vital to businesses and may be the most challenging issue with regards to any potential Brexit.  If there is a significant majority in favour of Brexit then it may be that there will be general acceptance of any short-term shocks to the economy.  At the current time, however, the polls are suggesting a very close vote.  This means that, whatever the outcome, around half of the UK’s population is likely to be unhappy with it.  If the outcome is a vote for Brexit, then those in favour of remaining may very well start to batten down their hatches and rein in their spending to a minimum in preparation for a major economic shock.  SMEs may therefore want to see how they can expand their markets in order to counteract this.

 

 

 

 

As an insolvency practitioner I often work with clients who have ended up in debt through no fault of their own. In many cases, people have struggled financially following a redundancy, marriage breakdown or illness and have no idea that there are options available to help them. Whilst entering into an insolvency procedure is a very serious step, in many cases it can allow you to move back towards a financially healthy position. The main options that are often suitable to achieve this are an Individual Voluntary Arrangement (IVA) or even Bankruptcy, here are some of the key advantages and disadvantages of each:

Advantages of an IVA

An Individual Voluntary Arrangement (IVA) is a process that was introduced to help people tackle their personal debts. In simple terms, it is a formal agreement between you and your creditors (the people you owe money too) that helps you pay back only what you can afford, over a set time period.

An IVA is often a good solution for people who have been struggling to make ends meet. Main advantages include:

  • Making one low, affordable monthly payment
  • It freezes interest and charges on your debts
  • It stops pressure from your creditors
  • It will legally write off debts you cannot afford to pay

For home owners, arguably the single biggest reason for preferring an IVA to bankruptcy is the ability to hold on to the family home.  The second main reason is that an IVA has less of an impact on your life in terms of your ability to get credit or to hold certain jobs.

Disadvantages of an IVA

Contrary to what certain daytime TV adverts appear to suggest, IVAs are anything but “get out of financial jail free” cards, nor are they “legal loopholes” or “secret tricks the banks don’t want you to know about”.  Entering into an IVA is a serious step and should be considered very carefully, the key disadvantages are:

  • Firstly, you must commit to make the agreed payments to the IVA for the full term, which is often 5 years (unless your circumstances change).
  • Secondly. although rare, it is possible for creditors to reject the proposal meaning the IVA cannot go ahead unless the terms are materially improved or changed.
  • Information on who has entered an IVA is publically available on the Insolvency Service website.
  • If you are unable to continue your payments into the IVA and a variation of the terms cannot be agreed, the Insolvency Practitioner (your IVA Supervisor) may have the obligation to terminate your IVA and petition for your bankruptcy.

You can find out more information here: http://goo.gl/xXNxCI

Advantages of bankruptcy

Bankruptcy is a legal solution for people who have accumulated unmanageable unsecured debts with little prospect of repaying them and who want to wipe the slate clean. Bankruptcy offers the opportunity to become debt free in 12 months but may require you to sell some of your assets such as cars or property to go towards repaying your creditors.

With a few exceptions, (mainly related to debts to the government and/or child support), all debts are written off in bankruptcy.  Your creditors are forced to leave you in peace and in most circumstances you will be discharged within 12 months and free to get on with your life.

Disadvantages of bankruptcy

There are two key disadvantages of bankruptcy.  The first is that you can be forced to sell any assets you own and use the money to pay off your creditors.  In other words, if there is any equity in the family home, then there is a strong chance that you will be forced to sell it.  Renters should note that, although in principle, they should be able to stay in their home if they can afford the rent, some landlords may not accept bankrupt tenants.  This leads on to the second major disadvantage of bankruptcy, it’s visible and it can have a long-term impact on your life, for example your ability to get a mortgage or to hold certain types of jobs. You may also find it hard to get a bank account and your credit score will be impacted severely.

You can find out more information here: http://goo.gl/io3sd5

Entering into an IVA or a bankruptcy procedure is a serious step to take but either solution will allow you to make a fresh start. If you are struggling financially and finding it more difficult to make ends meet, get in touch today for a free, confidential discussion – 0800 246 1845 or  email: mail@leading.uk.com

 

 

 

No matter how much blood, sweat and tears you may have put in to building a business, no matter how much money, time and effort you’ve spent on it, sometimes you have to accept that your business simply cannot continue.  However disheartening that situation might be, it can be very much to your advantage to face the situation head on and ask for help from an insolvency practitioner rather than hiding from reality and trying to struggle on.  Here are some reasons why.

You will start the process of getting closure

For as long as your company continues to trade, you will continue to have to deal with the pressures inherent in your situation.  Being the director of a business can be stressful enough without having to deal with demoralised staff or trying to hide the truth from them and pretend that everything is fine.  Even though watching as your company is wound down and any remaining company assets are sold may be painful to you, it will bring an end to dealing with creditors and their debt collectors and struggles to manage payments to HMRC.  Once the process is ended, you can walk away and start again, if you wish.

The liquidation process is less public

If you apply for voluntary liquidation, you will need to place an advertisement in the London Gazette, but this advertisement can make it clear that you are choosing to liquidate the company rather than being forced to do so due to your financial situation.  If you are forced into liquidation by a court, then the court will place an advertisement in the London Gazette at which point everyone will be made aware of your situation, including your bank which will freeze your account.

You avoid court procedures

If a court starts liquidation procedures then you need to attend court to settle them.  If you liquidate your company voluntarily, then you can avoid this process completely.

 You protect yourself from being prosecuted for wrongful trading

All liquidation proceedings have to be followed by an investigation into the events which led up to them.  In essence this is to ensure that the directors have acted in accordance with their legal obligation to act reasonably and fairly to all creditors.  When a company enters voluntary liquidation, it benefits from the expertise of the insolvency practitioner who will guide the directors through the process and actively work to ensure that they stay on the right side of all relevant laws.  Liquidators appointed by a court are simply required to conduct a thorough investigation of the events leading up to the liquidation and are highly unlikely to provide any advice or support to the company directors.  Liquidators appointed by creditors may be actively encouraged and even incentivized to find examples of behaviours which could potentially be construed to amount to wrongful trading.

You protect yourself from being made personally liable for company debts

The reason why creditors are so eager to discover any action which could be classed as wrongful trading, is that it opens up the possibility that they will be able to recoup some or all of their money by pursuing the directors personally.  Given that a conviction for wrongful trading can lead to an individual being disqualified from working as a company director for up to 15 years and/or being made to pay back creditors out of their personal assets, even the threat of being taken to court can be intimidating enough to force former directors to come to some sort of arrangement with their creditors.

You may find a solution to your problem after all

Insolvency practitioners will always advise directors of all the options open to them, including any options which would enable the company to carry on trading in a legal manner.  There’s no guarantee but it can and does happen that companies contact IPs and then discover that it is possible to find a way to continue trading as a viable operation. It is important to note that time is of the essence, if you feel you are sliding towards an insolvent position, earlier intervention will provide a much wider range of rescue options.

Recent newspaper headlines have been dominated by two topics, brexit, the budget and the relationship between them.  While the brexit remains a matter of speculation, the budget can be analysed in terms of its effect on small businesses – Jamie Playford, Insolvency Practitioner and Business Advisor explores the impact further.

No Change on the Move to Digital Wallets and Quarterly Tax Returns

One of the key points in the budget was a topic, which was conspicuous by its absence.  Back in the 2015 budget, the Chancellor announced that the long-standing annual tax return was to be phased out over five years and replaced with a digital tax account. This would consolidate all relevant tax details, thereby both reducing the need to file returns and making it easier to pay tax.  This announcement itself met with mixed reviews.  It was partnered with a second announcement that small businesses, landlords and the self-employed would have to start reporting their income on a quarterly basis.  This latter announcement has come in for a lot of criticism from those who believe that it overburdens small businesses.  In spite of the protests (and an online petition), there is no indication of a change to this plan.  Small businesses may therefore wish to keep a sharp eye on future developments to see what this change will mean in practice.

Relief for Small Businesses as Business Rates Become More SME-Friendly

For owners of small businesses, possibly the best news in the budget was that the threshold for small business rate relief was raised from £6K to £15K while the threshold for higher-rate relief was changed from £18K to £51K.  This was announced as a permanent change, although it remains to be seen what measures will be taken to ensure that these bands stay in line with inflation.  According to the Treasury, this change will mean that around 630,000 smaller businesses stop paying business rates completely, with the resulting £7 billion of lost revenue being made up by payments from larger businesses.  Corporation tax will also be reduced to 17% by 2020 although this tends to be less of an issue for SMEs.  Similarly the tightening up of rules to stop multinationals from essentially gaming corporation tax is unlikely to be of much direct concern to SMEs.

Clamping Down on VAT Evasion by Internet Merchants

Back in 2014, the EU announced a shake-up of VAT rules whereby VAT on cross-border sales became payable according to the country in which the customer was based rather than the merchant’s home country.  In some cases, this should have resulted in a substantial increase in the price of items purchased from offshore merchants.  The government believes that a combination of exploiting legal loopholes and straightforward VAT evasion on the part of offshore merchants is disadvantaging UK-based merchants and has announced that has instructed HMRC to clamp down on it.  If this clamp down is effective, it could be excellent news for both real-world and online merchants based in the UK, since it would eliminate (or at least substantial reduce) and unfair price advantage.

Consumer-Friendly Tax Changes

Changes to income tax, national insurance (for the self employed) and two new tax-free allowances for micropreneurs who are employed in the very small-scale trading of goods and services and/or earn income from property, could also potentially be good news for smaller businesses since they could free up funds for people to spend.  Likewise while the “sin” tax on cigarettes and rolling tobacco goes up and the notorious sugar tax is introduced, taxes on beer, wine and spirits are frozen, as is fuel duty.  The freeze on fuel duty in particular not only helps to reduce the cost of transporting goods from A to B but also reduces the cost of consumer transport, be it season tickets on trains or petrol for drivers.  This again could feed through into increased consumer spending.

If you are concerned about how these changes may impact you or your business, please do not hesitate to get in touch for a free, confidential discussion. 0800 246 1845 / mail@leading.uk.com

Well, it’s finally been confirmed – after years of lively discussion and heated debate, David Cameron has announced the referendum on leaving the EU will take place on 23 June. Whilst I am sure we all have our personal views as to whether we want to remain or leave, as a business owner, it is essential that you plan for the potential impact of a departure.

Earlier this month, the Financial Reporting Council urged businesses to plan for the potential costs of leaving the EU and whilst these warnings were predominantly aimed at FTSE Companies, small business owners should also take note. Many esteemed business professionals have already stated that there will be a knock-on effect to SME’s if the Brexit happens and a recent poll conducted by the Federation of Small Business confirms that 42% of business owners could still be swayed as to which way they will vote.

So with the level of uncertainty about the impact on business at an all time high, it is crucial that you plan for what happens should the Brexit occur.

Preparation is key

Having an understanding of how your financial position will be effected by a Brexit means you can start to plan and give your business the best opportunity of survival. Firstly, start with the basics – what impact would it have on your suppliers, staff and customers? For example, if one of your key suppliers decided they wished to remain in the EU and made the decision to relocate to mainland Europe, your supply chain could be impacted by amended taxes, customs charges and potentially slower product delivery. How would your business cope?

Secondly, if you employ non-British nationals, what would happen if a departure from Europe required them to have a visa or work permit in place to be able to continue employment? How would these changes impact your HR costs, productivity and ability to resource alternative staff quickly?

Taking the time to consider these types of matters along with other ‘What if?’ scenarios will give you an opportunity to devise specific measures that can be implemented quickly to protect your business. At this stage, nobody really has a clear understanding of what to expect if we do decide to leave the European Union but one thing is for certain – business owners that take the time to plan in advance will be in a much better position if and when the Brexit takes place.