News in brief: tax hikes, background checks, corporation tax, BIS

News in brief
News in brief

SMEs prepare for April tax hikes

More than a quarter (28%) of SME owners are planning to pay themselves a special dividend ahead of forthcoming tax hikes in April.

This is according to a survey of owner managed businesses by accountancy firm Moore Stephens, which goes on to say that this rush of dividend payments is necessary for business owners to avoid a sharp jump in their personal tax bills next year. For higher rate taxpayers the tax rate on dividends increases from 25% to 32.5% and additional-rate taxpayers will increase from 30.56% to 38.10%, a dividend tax hike of some 7% for all middle and high rank earners.

Moore Stephens partner Mike Cooper says: “Small business owners are moving quickly to take out money from their businesses at a lower tax rate.”

“Providing the accumulated profits are there, it is a perfectly sensible move and undertaken in the right way is something that HMRC has absolutely no issue with. However, SME owners who do not pay a special dividend before April 6 will have missed out.”

Businesses failing to carry out background checks

Around 38% of UK employers do not check whether their potential staff have the ‘right to work’ in the UK, according to a new study which claims that only 58% of organisations conduct any background screening checks on new hires.

The study, involving 175 organisations, is being published today by global background screening company, SterlingBackcheck. Time and cost were cited as the main reasons why employers fail to conduct background screening.

“Employers have a duty to prevent illegal working, so it’s their responsibility to conduct document checks and ensure that they only recruit people who have permission to work in the UK,” said SterlingBackcheck CEO Clare Hart. “The tight labour market makes it tempting for employers to look the other way but any business that fails to carry out these checks correctly risks a £20,000 civil penalty for each illegal worker, as well as damage to their brand and reputation. That’s a high price to pay.”

The study shows that rigorous employment background checks are most commonly undertaken by large organisations when recruiting executives, directors and managers. The companies least likely to screen new staff are small firms with fewer than 100 employees. Only 50% of companies screen their part-time hourly workers and just 28% of employers screen volunteers.

Tradesmen report strong revenues in 2015

Nearly three quarters of tradesmen reported an increase in revenue in 2015.

IronmongeryDirect’s Annual Industry Review, which was compiled to gain a snapshot of the construction industry, found that 72% of trade businesses experienced a revenue increase in 2015.

The majority of tradespeople (43%) said that sales had increased by up to 10%, with a third claiming revenues had improved by 11-20%; 16% said revenues rose by up to 30% and 8% claimed they had increased by more than 30%.

The report revealed that the construction sector occupied a positive position in 2015 as tradespeople across the country declared how busy they were. 52% said they were very busy with work in 2015 and 30% described themselves as busy. Only 4% admitted they were not that busy.

Enquiries were also up in 2015 with exactly half of the tradespeople questioned saying that they received more enquiries in 2015 than in 2014. 43% reported it was about the same.

However, as a result of having a lot of work on in 2015, 45% of tradespeople said that they had to turn business away, which came at a cost to their business.

Corporation tax to rise significantly in coming years

Businesses in London will see their corporation tax bill rise by an estimated 64% over the next 10 years to £18bn with small and medium enterprises contributing the lion’s share.

According to London chartered accountants Perrys, of the 294,000 businesses paying Corporation Tax in the capital small and medium enterprises combined make up approximately 99% of the contributions to HMRC.

Perrys Chartered Accountants CEO Stewart Pope said: “We estimate that small to medium businesses in the capital are paying an average annual corporation tax bill of £37,000 each, which is set to rise to £62,000 each by 2026.”

“The higher contributions also reflect the increase in profits that businesses are generating, which is a positive indication that the capital continues to remain a great place to do business.”

Last year the Chancellor announced a decrease in corporation tax rates from 20% to 18% by 2020, which will be a welcome relief for many SMEs.

BIS appoints new director general for business and science

Gareth Davies has been appointed to the role of director general for business and science, at the Department for Business, Innovation and Skills (BIS).

Mr Davies was previously the executive director and chief economist in the Cabinet Office, responsible for civil society, innovation and analysis. He spent his early career in PricewaterhouseCoopers, specialising in asset sales, competition policy and investment appraisal.

Having been the interim Director General for Business and Science since September 2015, Gareth will continue to lead approximately 450 staff, delivering ministers’ priorities to promote economic growth through research, innovation and transfer of knowledge, skills and ideas, as well as leading directorates with responsibility for business and enterprise.

Mr Davies said of his appointment: “I’m very excited to have the opportunity to see through the major reforms we started over the past year, including establishing Research UK, ensuring the UK can benefit from the fourth industrial revolution, and transforming the department.”