September Newsletter 2022

Sep 14, 2022 | Newsletters | 0 comments

Managing your cash in tough times

With ever-increasing supplier prices, a rise in interest rates and a looming recession, managing your cash flow is vital. Business owners can look at the direction of their cash flow as an insight into the health of specific products or services and overall market patterns.

Some types of businesses are more likely to run into cash flow problems, whilst others appear to be more resilient. If you are a business owner, you might be wondering which category your business falls into. No matter how inventive or straightforward your business model is, you can still have problems with cash flow. Here are our thoughts on managing the flow of cash in your business:

The first stage of understanding and predicting how funds flow is to perform a health check on your accounts. Look at your latest profit and loss statement and check that your income is sufficient to cover your expenses. If your profit is falling behind your expenses and cash flow is slowing down, you may need to take action. Prepare a funds flow statement so you know where the money goes. Next, create a yearly budget and look where cash could become tight and months where you can save to cover the quieter times. Look at those quieter months and think about flexible work scheduling, new products or services or other activities to tide you over.

Finally, make sure you collect your money from those who owe you quickly. Reward customer loyalty by offering early bird discounts and set credit limits and payment terms to ensure customers follow the rules. If you take on new customers, make credit checks. Penalise late payers and request upfront deposits or payments.

Talk to us about preparing a funds flow statement and annual budget so that you can work on your business for maximum success!

Proposed changes to Capital Gains Tax (CGT) on separation

The government have introduced draft legislation to relax the Capital Gains Tax rules within divorce financial settlements. HMRC have said that they hope the legislation will give spouses and civil partners more time to transfer assets, without incurring a charge of CGT.

Under the current rules, married couples only have until the end of the tax year in which they separate to transfer assets between them, free of CGT, this is known as the no gain/no loss rule. If the transfer of assets takes place in the tax year after their separation, then the transfer is deemed to be at market value and CGT is payable based on the gain at transfer. The divorce settlement or court order that transfers assets between couples often takes place many months after the separation which under the current legislation often leads to CGT being payable.

The main change proposed is that separating spouses or civil partners will be given up to three years after the year they cease to live together in which to make no gain/no loss transfers. Most divorces would be concluded within this period. No gain/no loss treatment will also apply to assets transferred as part of a formal divorce agreement.

Self-employed need to plan for big tax bills in 2023/24

The changes to the basis of assessment of self-employed profits are scheduled to change from 6 April 2024. The new rules mean that profits (and losses) will be assessed based on the amounts arising between 6 April and 5 April instead of the profit/loss of an accounting period ending in the tax year. This means that where the business accounts do not coincide with the tax year, the profits or losses will need to be apportioned. This is intended to coincide with the start of Making Tax Digital for Income Tax.

Transitional rules proposed for the previous 2023/24 tax year could result in large tax bills for some sole traders and partners, particularly those with an existing 30 April year end. The profits of year ended 30 April 2022 would be taxed in 2022/23 under the current rules with 2024/25 taxing profits arising between 6 April 2024 and 5 April 2025 under the new rules, but what about 2023/24? The profits taxed in 2023/24 would be those for year ended 30 April 2023 plus the period 1 May 2023 to 5 April 2024 – in total 23 months profits!

The good news is that there would be a deduction for “overlap relief” (as much as 11 months) which typically arise when profits are taxed twice at the start of the business – but those will often be much lower than the extra 11 months being taxed in 2023/24. The transitional provisions provide for the excess profits to be spread over the next 5 tax years to smooth out the excessive tax bill.

Advisory fuel rates for company cars

The figures in the table below are the HMRC suggested reimbursement rates for employees’ private mileage using their company car from 1 September 2022. Remember that provided all private fuel is fully reimbursed the fuel benefit does not apply. 

Where the employer does not pay for any fuel for the company car, these are the amounts that can be reimbursed in respect of business journeys tax free. Where there has been a change the previous rate is shown in brackets.

Note that for hybrid cars you must use the petrol or diesel rate. You can continue to use the previous rates for up to 1 month from the date the new rates apply.

Engine SizePetrolDieselLPG
1400cc or less15p (14p)  9p
1600cc or less 14p (13p)  
1401cc to 2000cc18p (17p)  11p 
1601 to 2000cc 17p(16p)  
Over 2000cc27p(25p) 22p(19p) 17p(16p) 

Diary of Main Tax Events September/October 2022 

DateWhat’s Due
19 SeptemberPAYE & NIC deductions, and CIS return and tax, for month to 5/9/22 (due 22 September if you pay electronically)
1 OctoberCorporation tax for year to 31/12/21 unless pay by quarterly instalments
5 OctoberDeadline for notifying HMRC of chargeability for 2021/22 if not within Self-Assessment and receive income or gains on which tax is due
19 OctoberPAYE & NIC deductions, and CIS return and tax, for month to 5/10/22 (due 22 October if you pay electronically)