Author Archive: Muhammad Zia

Take action – Loans to small businesses drop to record low

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.

It has led to the accusation that banks are “pulling up the drawbridge” on lending to small businesses.

The FSB’s quarterly Small Business Index (SBI) show just 43 per cent of applications 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.

Lack of finance ‘a threat to economic growth’

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

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 large proportion of what is available is being used to cover cashflow problems, often caused by late invoice payments from customers, according to the FSB.

Managing cash flow problems caused by late payments

The survey shows that 61 per cent sought traditional overdraft or loan products, while a quarter 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).

Your accountant will be able to provide advice and guidance.

How can businesses obtain necessary finance?

Measures that might persuade lenders to provide finance might include:

  • Keeping balance sheets and other documentation to show the business has been well run
  • Improving the company’s credit rating
  • Producing a business plan that is strong, concise and clear
  • Opting for the appropriate kind of loan, like instalment, short term or line of credit
  • Having the ability to provide collateral for the loan

If you are looking to finance your business, you should seek professional advice beforehand.

Link: Lending to small businesses hits all-time low

‘New deal’ for tenants to be delivered in Renters Reform Bill

The ‘biggest change to rent law in a generation’ will be delivered with the Renters Reform Bill (the Bill).

The Government says it says it will improve the lives of millions of renters by driving up standards in the private and social rented sector, delivering on the Government’s mission to level up the country.

Levelling Up and Housing Secretary Michael Gove said: “This is all part of our plan to level up communities and improve the life chances of people from all corners of the country.”

A new Private Renters’ Ombudsman will be created to enable disputes between private renters and landlords to be settled quickly, at low cost, and without going to court.

The new law will be put in place for the 4.4 million households privately renting across England by extending the Decent Homes Standard to the private rented sector for the first time – giving all renters the legal right to a safe and warm home.

It is designed to ensure all renters have access to secure, quality homes, levelling up opportunities for the 21 per cent of private renters who currently live in homes of an unacceptable standard.

Part of the Bill will also ban Section 21 ‘no fault’ evictions, protecting tenants from unscrupulous landlords, while strengthening landlords’ legitimate grounds for taking back their property.

Link: The Renters Reform Bill

National Insurance thresholds are changing – Are you ready?

From 6 July 2022, the Primary Threshold (PT) for National insurance will increase to £12,570. This is the threshold at which employees begin paying National Insurance contributions (NICs).

This will bring the rate in line with the current rate of personal allowances for income tax and means those earning below this amount each year will pay no tax or NICs.

It also means that a larger proportion of a person’s income will be free of NICs, meaning that most employees will enjoy a cut to their NICs.

This jump in the PT comes at a time when many employees are experiencing difficulties due to the cost of living and follows the Government’s decision to increase NIC rates in April.

On April 6th, the rates of NICs increased by 1.25 percentage points. This means, for example, that the main rate for employees rises from 12 per cent to 13.25 per cent.

The increase in NICs was legislated for to increase spending on health and social care and will be formally replaced by a new Health and Social Care Levy in April 2023, which will maintain this increase to provide funding to these sectors.

The increase in the PT means that most employees should see minimal change in their NIC bill, while lower earners below the limit might see their contributions cut entirely.

How does this help self-employed individuals?

The Lower Profits Limit (LPL), the point at which self-employed people start paying Class 4 National Insurance, will also be increased to £12,570 at the same time.

This measure also reduces Class 2 NICs liabilities to nil on profits between the Small Profits Threshold (SPT) and LPL.

This ensures that no one earning between the SPT and LPL will pay any Class 2 NICs but continue to accrue National Insurance credits.

What about employers’ contributions?

The changes to the NI thresholds do not affect the Secondary Threshold. This is the point at which employers must start making contributions, which remains at £9,100 per year.

As such, employers will have to continue paying NICs for their employees once they earn £9,100 per annum or more, even though the employee does not have to contribute until they earn £12,570 per year.

Do Directors enjoy the same threshold?

The PT for Directors for the entire tax year is £11,908 per year. Changes to the NI rules and an increase in dividend tax rates mean that it is important to reassess your remuneration strategy to minimise the tax burden on the business and individuals.

Link: Rates and thresholds for employers 2022 to 2023

Home Office facing probe over post-Brexit EU resettlement scheme

The Home Office is under investigation over whether it has fulfilled its obligations to EU citizens in this country who are seeking settled status.

The inquiry launched by the Independent Monitoring Authority (IMA),  the watchdog set up to look after EU citizens’ rights in Britain, will look into allegations of delays in providing EU citizens with the paperwork needed to work and access basic services in the UK after Brexit.

It comes after the watchdog spent months compiling complaints from EU Settlement Scheme (EUSS) applicants who experienced delays in receiving their certificates of application.

The EUSS was designed for EU/EEA/Swiss citizens who came to the UK before January 2021 and wish to continue living here, and for their family members of any nationality who wish to join them in the UK.

How does the scheme work?

It is an important certificate, post-Brexit, as it can be used as evidence of what rights they have in this country, including the right to work, rent or access benefits.

The Brexit withdrawal deal states that the UK must issue the documents immediately after receiving an application, while their application to remain is being considered.

The inquiry will assess whether there is any breach of the Brexit Withdrawal and Separation Agreements.

How can employers take on EU nationals?

  • Employers faced with a skills gap can help potential employees from the EU by making sure they are aware of the EUSS scheme, but the application is down to the individual. However, the employer can direct them to the relevant Government sites for more help.
  • From July 2021, employers are required to carry out right to work checks on any non-UK citizens, but not on existing employees before this point.
  • If a business is looking to recruit an EU citizen from outside the UK, but they are not eligible for settlement, it must follow the new immigration system to enable them to move for work.

What powers does the watchdog have?

The IMA, which has the power to take legal action against the Government, is expected to interview officials and review policies and processes adopted by the Home Office as part of the probe.

In response to the IMA’s announcement, the Home Office said it has implemented the citizens’ rights provisions of the Brexit divorce deal in good faith, will collaborate with the inquiry and will consider the watchdog’s report in full upon completion.

For help and advice and related matters contact our expert team today.

British science projects hit by Brexit row with EU

British leadership in prestigious European research projects have been hit by the continuing row over the Northern Ireland Protocol and trade border with the UK.

As a result, the EU is preventing British scientists from joining the €95 billion (£80 billion) Horizon Europe research funding programme.

The UK bid to join the group as an associate member has been delayed because of the continuing post-Brexit dispute.

What is Horizon Europe?

The European Commission now says UK scientists cannot hold leadership roles because the UK’s membership of the flagship Horizon Europe (HE) funding network has not been ratified.

Horizon Europe is the EU’s key funding programme for research and innovation, with a budget of €95.5 billion.

It tackles climate change, helps to achieve the UN’s Sustainable Development Goals and boosts the EU’s competitiveness and growth.

Leadership of Gaia project lost

According to The Guardian newspaper, this has resulted in a Cambridge University scientist losing his coordinating position in the European Space Agency’s Gaia mission, which maps the nearly two billion stars in the Milky Way.

Astrophysicist Nicholas Walton has been forced to hand over his leadership role on the scheme because of the continuing row over Northern Ireland’s Brexit arrangements.

Dr Walton, a research fellow at the Institute of Astronomy, was the lead in a €2.8 million pan-European Marie Curie Network research project but must now take a back seat.

He is just one of a handful of British physicists approved for a grant from Horizon Europe.

Option of moving to the EU

The newspaper also reported that Carsten Welsch, a physicist at Liverpool University, must either move to the EU or hand over leadership of his research programme to an EU institution.

Dr Walton’s coordinating role came with the opportunity to be part of the European project researching the €1 billion successor to Gaia, Esa’s Voyage 2050 programme.

The business secretary Kwasi Karteng is reportedly reviewing the UK’s membership of Horizon Europe following the EU’s refusal to ratify the deal in December 2020.

For help and advice with Brexit related matters, please get in touch with our expert team today.