February Newsletter 2022

Will there be a mini Budget on 23 March?

Whilst most of us were wrapping our Christmas presents on 23 December 2021, the Chancellor of the Exchequer, Rishi Sunak, commissioned the Office for Budget Responsibility (OBR) to produce an economic and fiscal forecast for Wednesday 23 March 2022.

The main Budget is scheduled for Autumn each year, but it is anticipated that the Chancellor will take the opportunity to make a number of tax announcements. Many are hoping that the Chancellor will zero rate VAT on domestic power, to ease the burden of households struggling to pay their energy bills. Now that the UK has left the EU, we are free to set our own VAT rates and the Prime Minister made this one of his key Brexit promises!

New VAT penalty regime delayed to January 2023

A newer (and arguably fairer) system for determining penalties for late returns and late payment of VAT was going to be introduced in April of this year. However, the new system start date has been delayed and will instead come into effect from January 2023. The same system will also apply to returns under Making Tax Digital (MTD) for income tax and those penalties will now start in April 2024.

Under the new regime, taxpayers will accumulate points for late submissions, and only after reaching a certain threshold, will an automatic penalty be imposed. The threshold will depend on how regularly the taxpayer is required to submit a return.

Are you planning on selling your business in 2022?

As the economy slowly begins to recover, now could be a good time to start thinking about selling your business. Under the current capital gains rules, the first £1 million of an individual’s gains potentially qualify for a 10% rate of tax (provided business asset disposal relief applies). We can check whether or not you and other business owners qualify for this relief. It is worth noting that the £1 million limit applies to all disposals during an individual’s lifetime.

If your business is worth more than £1 million, you might want to consider the transfer of shares to other family members, although they will need to satisfy the conditions for business asset disposal relief, for at least 2 years prior to any sale.

When passing on the business or some of your shareholding, there are generous tax reliefs that facilitate the transfer of ownership, without tax charges arising. These tax reliefs are currently available on the transfer of a trading business, although with careful planning, it may also be possible to pass on an interest in an investment business. We can of course discuss your plans with you to ensure that you are able to take advantage of all available tax reliefs.If you do not wish to sell your business but are looking to reduce your involvement, you may be considering passing on your business to the next generation, or maybe your management team. 

If your family are not interested in taking over your business, have you considered selling the business to your management team?

In a typical management buy – out, the existing management would set up a new company which would then raise finance to acquire your current business, so this is essentially the same as a sale to a third party, except the management team would already know quite a bit about your business already. They would still nevertheless need to carry out due diligence and require you to provide warranties and indemnities as in a third party sale. An increasingly popular alternative to the classic management buy-out referred to above would be to sell your company to an Employee Share Ownership Trust (ESOT).

Setting objectives for your team

Setting goals for the business is one thing, but in order to succeed, you need to set smart objectives for your team.

Any good business will have a set of goals which have been agreed by the management team. However, in order to achieve any goals, they need to cascade throughout the business. For example, if you want to grow your sales by 10%, each of your sales team should have an objective to achieve revenue that is 10% higher than last year. If you want your team to move in the same direction towards a common goal, you need to set specific, measurable, achievable, relevant, and time-bound (SMART) objectives for each member of the team.

Biting off more than you can chew can be demotivating. Therefore, the best way to set realistic objectives for your team is to start small. An example of this is rather than asking your customer facing team to sign up 120 new clients this year, break that goal down into smaller monthly chunks and set an objective to sign up 10 new clients per month. Laying out the small, attainable stepping-stones each month can have a much more positive effect on motivation.

Ensure that you and your team write down your objectives. This helps commit them to memory. Objectives should be revisited regularly and kept visible. If a goal is staring you in the face because it is on your computer desktop then you are more likely to do something about it.

It is vital that the objectives you set for your team members are both measurable and achievable. Agree metrics at the start of the year, put a monthly reporting system in place. Whether you measure – sales, headcount, revenue or production levels, the key is being able to measure progress on a regular basis. Having the right reward structure in place can motivate your team to drive forward and achieve their objectives. Consider what sort of incentive structure would work well in your firm.

How to manage stress at work

The pandemic saw an exacerbation of work-related stress, as many of us found we were suddenly having to shift to newer ways of working; whilst at the same time, balancing family responsibilities (with home-working and home schooling, etc), testing the resilience of many of us.  Stress can have a very negative effect on physical and mental health, to the extent that it can affect behaviour and people’s performance.

Work-related stress can have a knock-on effect on relationships with colleagues.  It is a major cause of long term absence from work, so knowing how to manage it is key for businesses. Ideally, employers should approach stress management proactively, focusing on prevention and early intervention.

Managers should lead by example in promoting healthy working habits. This may include taking regular breaks, encouraging employees to take all of their annual leave, and avoiding sending emails outside of working hours as much as possible. If managers take an interest in their own well-being, others will follow suit.

Keep an eye on workloads and discuss this with your team regularly. Ensure that work is being shared equally and try to identify any people who may be overworked. If someone is showing signs of stress, try to delegate some of their workload elsewhere, or extend a couple of deadlines, to take the pressure off.

Invest time in building relationships with your team. If you know your team better, you will be more attuned to their stress levels. Keep up positive communication, celebrate successes and encourage your people to switch off after work or at weekends.

Regular team meetings and one-to-one meetings are key, particularly if your people are working from home. Positive interactions with colleagues can help give people a boost if they are feeling under pressure. Encourage feedback and let your team know that it is ok to ask for help if they have too much on their plate.

Diary of main tax events February/March 2022

DateWhat’s Due
19/02PAYE & NIC deductions, and CIS return and tax, for month to 5/02/22 (due 22/02 if you pay electronically)
28/2Extended deadline for filing self-assessment tax return for 2020/21 without incurring late filing penalty.
01/03Corporation tax payment for year to 31/5/21 (unless quarterly instalments apply)
19/03PAYE & NIC deductions, and CIS return and tax, for month to 5/03/22 (due 22/03 if you pay electronically)