Businesses across the UK are already benefitting from the temporary tax relief offered by the super-deduction but many more could still be missing out on this vital support.

The super-deduction scheme was introduced on 1 April 2021 and will run until 31 March 2023. It allows firms investing in qualifying plant and machinery assets to benefit from a 130 per cent first-year capital allowance.

This allows companies to cut their tax bill by up to 25p for every £1 they invest. Most companies also benefit from a 50 per cent first-year allowance for qualifying special rate (including long life) assets.

Thanks to the super-deduction, companies will be able to claim allowances of 130 per cent on most new plant and machinery investments that ordinarily qualify for main rate writing down allowances, such as:

• Compressors
• Computer equipment and servers
• Electric vehicle charge points
• Foundry equipment
• Ladders, drills, cranes
• Office chairs and desks
• Refrigeration units
• Solar panels
• Tractors, lorries and vans.

Businesses can claim a first-year allowance of 50 per cent on most new plant and machinery investments that ordinarily qualify for special rate writing down allowances. Special rate investments include:

• Parts of a building considered integral – known as ‘integral features’
• Items with a long life
• Thermal insulation of buildings.

To benefit from the relief, the assets purchased must be new and not second hand or refurbished equipment.

The relief is also only available to incorporated companies, but unincorporated businesses, such as partnerships and sole traders, can continue to benefit from the Annual Investment Allowance (AIA) which permits a deduction of 100 per cent for qualifying plant or machinery expenditure up to the threshold of £1 million until March 2023.

Here is an example provided by HM Revenue & Customs (HMRC) on how the super-deduction works:

• A company incurring £1 million of qualifying expenditure decides to claim the super-deduction
• Spending £1 million on qualifying investments will mean the company can deduct £1.3 million (130 per cent of the initial investment) when computing its taxable profits
• Deducting £1.3 million from taxable profits will save the company up to 19 per cent of that – or £247,000, which is 19 per cent of £1.3 million – on its Corporation Tax bill.

The AIA remains available alongside the super-deduction for incorporated businesses as well, so businesses must review how they use these schemes together to maximise the tax relief available.

Link: Super-deduction

While the national job vacancy boom is good news for job seekers, it could be a nightmare for businesses keen on retaining high-quality staff.

While a pay rise is always welcome it may not always be the most tax or National Insurance efficient approach when compared with other benefits, including salary sacrifice, that could be as effective in persuading key employees to stay put.

Salary sacrifice enables employees to exchange part of their salary for a non-cash benefit from their employer, such as increased pension contributions, mobile phones and bus passes or even funding a new car.

Other examples of common salary sacrifice benefits include:

• Childcare vouchers
• Cycle to work scheme
• Car hire/lease scheme
• On-site nurseries
• Car parking
• Gym membership
• Pre-paid store cards
• Personal learning.

For each salary sacrifice arrangement, both parties must agree on what the cash value of the benefits on offer is worth to ensure the benefit fairly compensates the employee for their loss of income.

Sacrifice arrangements tend to remain in place for at least 12 months unless the employee experiences a lifestyle change.

Effect on tax and National Insurance contributions

The impact on tax and National Insurance contributions payable for any employee will depend on the pay and non-cash benefits that make up the salary sacrifice arrangement.

You need to pay and deduct the right amount of tax and National Insurance contributions for the cash and benefits you provide. For the cash component, which means operating the PAYE system correctly through your payroll.

Calculate a non-cash benefit

For any non-cash benefits, you need to work out the value of the benefit by using the higher of the:

• Amount of the salary given up
• Earnings charged under the normal benefit in kind rules.

For cars with CO2 emissions of no more than 75g/km, you should always use the earnings charge under the normal benefit in kind rules.

The only benefits you do not need to value and do not have to report to HMRC for a salary sacrifice arrangement are:

• Payments into pension schemes
• Employer-provided pensions advice
• Workplace nurseries
• Childcare vouchers and directly contracted employer-provided childcare that started on or before 4 October 2018
• Bicycles and cycling safety equipment (including cycle to work)

How to set up a salary sacrifice scheme

As an employer, you can set up a salary sacrifice arrangement by changing the terms of your employee’s employment contract. Your employee needs to agree to this change.

A salary sacrifice must not reduce earnings below National Minimum Wage rates.

As the UK braces for a rise in National Insurance rates, many professionals see the use of salary sacrifice arrangements as a way of potentially reducing contributions – especially the provision of an electric company car. For expert advice on salary sacrifice, seek professional advice.

Link: Salary Sacrifice

A cash flow statement provides data about all cash inflows a company receives from its operations and investments.

It tells you how much cash is entering and leaving your business in any given period.

Along with balance sheets and income statements, it is vital for managing your small business accounting and making sure you have enough cash to keep operating.

These important statements deliver accuracy because they track the cash made by the business in three main ways – through operations, investment, and financing.

It is a key part of understanding your business’s financial health, so much so that it was listed as third in the Financial Reporting Council’s (FRC) list of most frequently raised areas in their 2020–21 Corporate Reporting Review.

Transparency and integrity

The FRC, which regulates auditors, accountants and actuaries, and promotes transparency and integrity in business, found cash flow statements with items incorrectly classified.

It said in its Annual Review of Corporate Reporting for 2020/21: “We continue to be concerned about the number of queries we raise in relation to compliance with the requirements of IAS 7 ‘Statement of Cash Flows’.

“As in prior years, many of the cash flow statement errors described in sections 3.1.3 and 6.3 were identified through critically analysing the line items appearing on the face of the statement. Companies should increase their focus on cash flow statements as part of their pre-issuance reviews.”

To avoid errors, and to emphasise the importance of people taking personal responsibility for the stewardship of cash flow, sufficient time and resources should be allocated to prepare and review them.

Business leaders should take responsibility for cash management if there is a risk of business failure and avoid errors when reporting, certain guidelines should be followed, such as:

• Regular communication with those in charge of cash movements
• Strict controls over cash flow reporting
• Making sure responsibilities, reporting lines and staff cover for all cash-related matters are clearly understood
• Enhancing forecasting effectiveness to get a clearer idea of cash flow in real-time
• Preparing easy to understand cash flow reports to support critical business decisions and funding
• Increasing frequency of reporting
• Preserving underlying data in as much detail as possible.

The principles outlined should apply to all sizes or types of business. Cash flow is the lifeblood of any business and the monitoring and maintenance of it should not be underestimated.

Link: Cash flow statements – avoid common pitfalls

The cloud is king in the world of accounting, with a vast range of software and applications available, designed to be easy to use by businesses and their owners.

The beauty of cloud accounting is that the software can be accessed anywhere that has an internet connection on a range of devices.

Good accounting software can be critical for business leaders. It makes it easier to get a handle on company data and understand how the company is performing at any time.

This empowers you to work with your accountant to make effective decisions quickly and confidently.

Here are some areas where you can do more with accounts software:

Controlling budgets

Planning and controlling spending are key areas for business success, especially at this moment in time. Successfully implemented software can help your business grow by allowing you to allocate your budget to the areas of your business that make you the most money.

Once you have allocated budgets, your teams can record spending in the latest accounts software so you can always see if you are on track or overspending in less profitable areas.

Multi-user access

Using traditional accounting software can be expensive, difficult and time-consuming to upgrade. In comparison, most cloud accounting platforms update automatically for free and under most licenses, giving you multi-user access, without the need to install expensive software on multiple computers and devices.

Multi-user access makes it easy to collaborate online with your team and advisors and allows your accountant to access your data in real-time to provide insights that help your business thrive and grow or warn you of potential risks on the horizon.

Staff access to the software and security

You may not want everyone to see everything, which is why you can grant different levels of access to different people within your organisation.

The cloud is one of the most secure ways to store information thanks to the sophisticated encryption used by many platforms’ servers.

This means that no one can access your data unless they have a login to the online account and permission to view the information saved there.

There is an app for that

The growth of platforms has been outpaced by the incredible number of connected apps that support the main functions of cloud accounting by helping with analysis and automation.

There really is almost an app for everything when it comes to cloud accounting. These provide you the tools to achieve incredible things.

Although much of the focus in recent years has been on the essential role of cloud accounting in compliance with Making Tax Digital, more and more businesses are learning about the great benefits on offer beyond this.

Link: Eight tips to make the most of your accounting software