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In January 2014 R3 released a business distress index which has highlighted positive figures in UK business growth for 2014. It states that 63% of UK businesses are showing at least one key indicator of growth which suggests that the recovery is bedding in and gaining ground.

There are 5 key indicators of business growth

– Investment in equipment

– Increased sales volume

– Business expansion

– Increased profits

– Growing market shares

By businesses showing positive signs on the above list, it should be the beginning of businesses increasing in confidence which will hopefully aid in their longevity
It needs to be noted however that 37% of businesses are still showing signs of distress. While this means a third of businesses may still be struggling, it is not something to panic over. Carefully and proactively looking after these businesses is the best way to proceed. Keeping a close eye on their management accounts, cash flow forecast and balance sheet is something that bookkeepers, accountants and directors themselves should be concentrating on while signs of distress are still visible.

Some key indicators to look out for within distressed businesses are:

– Creditors being more confident in pursuing their debts

– Under Investment during recession may cause for concern.

– Increase demand on products and goods can put pressure on a company’s cash flow, supply chains and business models

If businesses are prepared to fight through their struggles then their professional advisors should be prepared to support and encourage them with useful information and help along the way.

The flat rate VAT scheme for small businesses is designed to reduce administration hassle for the businesses that use it, not to reduce the amount of VAT the business pays over to HMRC, but that is often a side effect of using the scheme.

You can use the flat rate VAT scheme if you have an annual turnover up to £150,000 (net of VAT). Once registered to use the scheme, you must apply VAT to your sales at the rates required for the particular product or service (20%, 5% or zero). However, when completing the quarterly VAT returns you ignore any VAT paid on purchases, apart from large assets costing over £2000. You calculate the VAT to be paid over to HMRC as a flat percentage of your gross sales, with the percentage used determined by the trade sector which most of your sales fall into.

For example a hairdresser which is registered for the flat rate scheme must use a flat rate of 13%. On sales of £3,000 in the quarter she charges VAT at 20%: £600. She will pay VAT to HMRC of: 13% x £3,600 = £468.

You must choose to register for the flat rate VAT scheme, it will not be offered to you, even if you would be better off using the scheme. When you register you must choose which of 55 trade categories best fits the majority of sales made by your business. This is important as the flat rate percentages vary from 4% to 14.5% for different trade sectors, so an incorrect choice of trade sector can be very expensive.

You can change the trade sector you opt to use, but HMRC generally only permit a change to be made from the beginning of the current VAT quarter. You must also review the trade sector chosen on the anniversary of starting to use the flat rate VAT scheme. If your sales mix has altered so most of the sales are in a different trade sector, you must switch to using the flat rate percentage relevant to the majority of your sales.

If a company is making a profit it can make charitable donations and get relief against corporation tax. It should claim the total donations made in the accounting period on the corporation tax return for that period. However, the deduction of donations cannot change a taxable profit into a loss, or increase a taxable loss. In those cases there is no tax relief for the donations. Although, if the company is part of a group of companies, the relief for the excess donations may be passed to another member of the group.

The recipient charity cannot claim gift aid relief on the company’s donation

HMRC beat its target for tax investigation work by £2 billion in the past year, bringing the total revenue it raised through compliance work to an all-time high, according to new research.

Analysis by UHY Hacker Young shows a record £20.7billion in additional revenue was collected by HMRC through compliance work focused on tax avoidance and evasion in 2012/13 – up 11% from the £18.6billion taken in the previous year.

Roy Maugham, tax partner at the firm, said: “HMRC’s target for the amount of extra revenue it wants to claw back from compliance investigations has become massively ambitious. But it has managed to smash through that target.

“Not all of the extra tax take is from clear cut tax evasion – it is often from HMRC imposing its view of how the tax system works on SMEs and individual taxpayers through the use of an army of tax inspectors and lawyers. Businesses and taxpayers that can’t afford professional advice to deal with a HMRC investigation don’t stand a very good chance. Many feel they have no choice but to just pay up otherwise they risk being dragged into expensive litigation.”