Annual R&D spend in the UK reaches £25 billion

According to the latest figures from the Office for National Statistics (ONS) businesses in the UK spent £25 billion on research and development (R&D) during 2018.

The figure represents a 5.8 per cent increase on the previous year when the figure stood at £23.7 billion.

The ONS claim the figures highlight an upward trend when looking at R&D expenditure in constant price terms with an average annual growth rate of 2.5 per cent since 2007 levels.  The increase from 2017 was 3.9 per cent.

The largest increase in R&D expenditure came from the Aerospace sector which rose 14 per cent to £210 million.

Pharmaceuticals maintained its position as the largest product group, with £4.5 billion expenditure, a 3.3 per cent increase on 2017. The product group accounted for 18 per cent of total expenditure performed in UK businesses.

Motor vehicles and parts took second place, increasing by 4.3 per cent to £3.8 billion, continuing the growth seen over the last nine successive years.  This group represented 15 per cent of total expenditure.

Large increases in expenditure were also seen in the telecommunications group, at £192 million (25 per cent) and other manufactured goods at £48m (21 per cent).

The top five product groups accounted for over half (54 per cent) of the total UK business R&D expenditure in 2018.

More than two-thirds of product groups saw increasing investment in R&D. However, 10 product groups posted a decline. The largest two decreases were in electricity, gas and water supply; waste management, and food products and beverages; which both fell by £21 million.

Link: Research and development expenditure

Keeping workplace gifts tax-free this Christmas

Over the Christmas period, you may wish to treat your employees. This is a tried and trusted approach to building a strong relationship with your team.

But are you aware that you may be breaking PAYE rules by doing so?

We want to ensure that you enjoy the holidays just as much as your team, so we’ve put together our top tips to ensure that you stay on the right side of the taxman this Christmas.

Getting gifts right

Trivial benefits are items of value given to an employee that do not count towards taxable income or National Insurance Contributions (NICs).

To qualify, the gift must meet ALL of the following conditions:

  • The gift isn’t in the terms of the employee’s contract
  • It is below the value of £50
  • It isn’t a performance-linked reward
  • It isn’t cash or a cash voucher

A trivial benefit in kind could include a Christmas lunch, a small Christmas present, or a gift on the day of an employee’s wedding.

If the gift does not meet all of the above criteria, it must be reported as a benefit in kind to HM Revenue & Customs (HMRC) and tax must be paid as appropriate.

What about incidental expenses?

Incidental expenses, as described by HMRC, are expenses “incurred by an employee while travelling overnight on business”. These may include purchasing newspapers, paying for laundry or using the hotel telephone.

As long as the value of the expenses does not exceed more than £5 per night for travel within the UK and £10 per night for travel outside the UK, they do not have to be reported to HMRC.

For more information on tax exemption for benefits in kind, click here

Link: Tax on trivial benefits

HMRC urges taxpayers to be vigilant ahead of self-assessment deadline

HM Revenue & Customs (HMRC) has urged taxpayers to be vigilant ahead of the self-assessment deadline on 31 January 2020, with a surge in fraudulent activity expected.

HMRC has said that it has received 900,000 reports in the last 12 months relating to suspected fraud, with phone calls, text messages and emails being the most common form of scam.

The volume of scams is expected to increase ahead of the self-assessment deadline, with fraudsters purporting to be from HMRC sending emails or text messages with a link to a fake HMRC page in an attempt to steal data and money.

Genuine organisations such as HMRC or banks would never contact an individual to ask for personal data, such as passwords, bank details and pins.

Gareth Shaw, Head of Money at Which?, said: “The number of people targeted by
HMRC scams is staggering and the problem is only likely to get worse as the self-assessment deadline looms.

“Sophisticated tactics like number spoofing see innocent people losing life-changing sums every day – so banks, telecoms companies and firms being targeted must collaborate on developing solutions to halt this worsening crime.

“Victims of HMRC scams often end up being tricked into transferring money to a criminal, and while a new industry code is in place offering greater protections against transfer fraud, the next government must make this mandatory to ensure all payment providers are signed up to these vital measures.”

Some experts are also calling for banks and regulators to agree on a reimbursement fund that will ensure that victims will be able to recoup money lost if they are affected by these scams.

Link: HMRC warns customers to be aware of Self-Assessment tax scams

The end of the help-to-buy ISA – What’s next?

Since 2015, banks and building societies have been offering help-to-buy ISAs to first-time buyers. To qualify, you had to be 16 or over and be a first-time buyer.

However, as of the end of last month, the scheme has been closed to new savers. Under the scheme savers could deposit a lump sum of up to £1,200 when they opened an account, following this, each month they were able to save up to £200 a month.

The Government then boosted savings by 25 per cent, so for every £200 saved, first-time buyers received a bonus of £50.

The minimum Government bonus is £400; this means you needed to have saved at least £1,600 into your ISA before you can claim your bonus. The maximum Government bonus is £3,000 and to receive that, you needed to have saved £12,000.

To receive the Government bonus, the money must be used to buy a home up to the value of £250,000 outside London, or up to £450,000 in the capital. In addition, this must be your only home, and it can’t be rented out or used as a holiday home.

What happens since its closure on 30 November?

The ISA’s won’t be available to new savers anymore; however, if you opened your account before then, you can keep saving into it until November 2029.

At this stage, your account will close to additional contributions and you must claim your bonus by 1 December 2030.

LISA

Although the Help to Buy ISA has ceased for new savers, individuals over the age of 18 will still be able to use the Lifetime ISA (LISA) to purchase a home if they are first-time buyers.

The LISA offers a similar top-up of 25 per cent on a person’s savings when it is used to buy a home worth up to £450,000, but as you can deposit a greater amount over a longer timeframe – £4,000 each year, until you’re 50 – there is the potential to build up a far larger deposit.

The bonus is paid at the end of the tax year in which the money is withdrawn for sale, which may mean that the bonus can contribute directly to the final deposit amount.

The LISA must be used to either purchase a home or withdraw funds when a person is aged 60 or older as part of their retirement fund. Withdrawing the funds for any other reason means that they will not benefit from the bonus.

Link: Help to Buy

Late payments a huge drain on SMEs

Small firms are owed a staggering £23.4 billion in late payments, an issue that is continuing to cause greater problems for businesses each year.

In the last year alone, the figure has increased by £10.4 billion

According to one study by Pay.UK, this is costing small businesses dear in both time and money, as 22 per cent of those waiting to be paid are spending £500 per month chasing payment and are using up millions of hours per year.

The research also shows that the number of firms in the UK experiencing overdue payments has hit 54 per cent among small to medium-sized enterprises (SMEs), the highest level since 2015.

In addition, the average late payment debt has increased this year to £25,000 per business, an increase from £17,000 in 2018, which is worrying as, on average, SMEs say that a debt burden of just £35,000 could jeopardise their business.

Numerous studies suggest that more than half the small firms affected chase payment in their own time, which eats into their personal life and jeopardises their business, with 63 per cent of those impacted saying that bad debt has a negative effect on their business.

Different business owners have different methods of coping with the burden of bad debt, with more than a third saying they have to rely on bank overdrafts, while almost a quarter revealed that being paid late forces them to hold back on settling their own business debts or even paying their staff on time.

Link: UK SMEs face debt burden of £23.4 billion

Around half of the UK’s SMEs admit to making errors on taxes

According to accounting software providers, QuickBooks, over 50 per cent of UK small and medium-sized enterprise (SME) owners have made a mistake when filing their VAT returns, while just a quarter (25 per cent) feel confident that they have filed their VAT accurately.

As the business owner, it is important to bear in mind the following tax obligations when filing your taxes:

Tax Returns

If you are self-employed, you need to check whether you are entitled to tax credits, so you don’t lose out on valuable income later on.

Self-employed individuals are entitled to the same personal allowance as someone who is employed.

Don’t overpay your taxes

A recent study revealed that small businesses are 56 per cent more likely to overpay on their taxes due to VAT filing mistakes.

Only half of all SME owners have completed their taxes efficiently or even correctly, and subsequently, many are overpaying their taxes.

Despite being able to claim this tax back, these errors could ultimately cost you and your business, which could negatively impact your cash-flow.

Making Tax Digital 

In April 2019, the Government began its digital transition for ‘making tax digital’, making it easier for individuals and businesses to accurately file their taxes and reduce the number of mistakes being made.

Therefore, as an SME owner, you must stay ahead of the changes, as this will affect your businesses taxes.

To avoid any errors in your next tax return it makes sense to seek out professional advice to ensure that you avoid penalties and do not pay more than is due.

Link: A quick tax guide for small businesses