The apprenticeship levy: small business implications

The apprenticeship levy: small business implications

The apprenticeship levy: small business implications 

With a lack of detail about how the apprenticeship levy will be implemented when the new rules were announced, there remains some uncertainty around the levy and what it may mean for smaller businesses.

Although the government has now provided additional details, many small businesses are still unsure about whether they will be levied with the new charge. For groups of smaller companies, in particular, this is a worthwhile reminder and update on where connected companies stand with the apprenticeship levy.

How will the apprenticeship levy work?

Starting 1 April 2017, the apprenticeship levy will be set at a rate of 0.5% of an employer’s paybill. Each employer will receive an allowance of £15,000 to offset against the levy, so only employers with a wage bill in excess of £3m will be affected.

All employers operating in the UK with a wage bill of over £3m will therefore need to pay the new 0.5% levy, regardless of whether or not apprentices are employed.

Because of this allowance, it is expected that nearly 98% of companies will not pay the new charge.

Small businesses could still be caught out

Based on the additional details the government has now published, there appear to be wider consequences for connected companies and groups than initially expected. The government has confirmed that: “where a group of employers are connected they will only be able to use one £15,000 allowance” to offset against the levy.

It was initially drafted that the allowance could not be split between connected companies, meaning that many SME groups would have had to pay the 0.5% levy. Some SME groups, however, may still be caught out by the levy….even those connected companies that have paybills below £3m when the group total paybill exceeds £3m.

You can find more on the apprenticeship levy in our detailed guide here.

More from our tax experts

You can find all of our latest tax articles and tax resources here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Scott Sanderson

Scott Sanderson Partner

Scott Sanderson began his career with Hawsons and trained as a Chartered Accountant, becoming a partner in 2015, specialising in the healthcare sector and small businesses. For more details and advice, please contact Scott on [email protected] or 0114 266 7141.[/author_info]

4 tips for increasing law firm profitability and performance

4 tips for increasing law firm profitability and performance

4 tips of increasing law firm profitability and performance

The legal sector is an extremely competitive market and it can often be difficult to increase profitability and performance. However, as legal clients are continuing to demand more for less, law firms need to become more efficient and take steps to maximise their profitability for a greater return.

Additionally, with the ongoing deregulation of the sector (including proposed plans to remove barriers to entry for Alternative Business Structures [ABSs]) the future is certainty not going to be business as usual for many law firms. The legal profession is today presented with challenges that are infinitely more difficult than ever before.

In this article we consider some of the more important points for increasing law firm profitability and performance.

1. Innovation and diversification

There are major opportunities for growth out there for law firms that are able to bring a quick and flexible approach to the legal services that they provide. Now perhaps more than ever the opportunities to increase law firm profitability depend on the work types engaged and service delivery, with innovation and diversification serving as an essential driver.

Loosely speaking, there are four main ways to innovate:

  • Products and services;
  • Pricing models;
  • Service delivery, and;
  • Internal processes and strategy.

For many laws firms, innovation is becoming embedded as a core part of what they do and we are seeing a lot of positive innovation being done across the legal sector. In our experience, innovation in the legal sector is essential if a firm wishes to take advantage of some of the more profitable opportunities in an exciting but challenging market.

2. The era of information technology

Technology that streamlines client processes to increase law firm profitability is nothing new for the legal sector. Law firms have long adopted technology that facilitates secure file sharing, client knowledge portals etc, and these are now essential parts of service delivery and the client experience.

In the future, it is likely that information technology will play an even greater role in the legal services market and will undoubtedly be a major focus of investment for law firms in the year ahead.

Law firms will, however, inevitably find themselves more vulnerable to cyber breaches in the years to come, and need to be prepared for such attacks. Firms must implement robust internal standards and procedures to ensure that criminals do not undermine their financial standing and profitability. As well as the financial impacts this can have, firms must not lose sight of the reputational damage that can be caused.

3. Have a long term goal in mind

By keeping on top of finances and day-to-day business operations legal professionals have the opportunity to improve the firm, increasing its profitability and thereby improving the value of its services as well.

The age profile of the sector is rising and many of those who are approaching retirement age have been instrumental in building and leading the practice in which they work. When they step down they leave large shoes to fill, which is why law firms must look to the future and set clear goals about how they can increase profitability in the long term, as well as the near future. A strong plan must be drawn up at the earliest opportunity.

Succession in law firms is something we have looked at in detail before. 

4. Reduce administrative costs and utilise staff time

The burden of administration and compliance often takes up more time than it should. A key driver to increase law firm profitability, as with any business, involves the efficient utilisation of resources; for a law firm this often boils down to staff time. The challenge is to maximise the number of chargeable hours and reduce the amount of non-chargeable time.

Linking with point 2 this can be achieved through the power of technology, allowing staff to focus on fee-earning tasks, instead of managing and inputting data on complex systems. In essence, technology enables more traditional and routine tasks to be automated, maximising chargeable hours.

Reducing administrative costs could also include things like outsourcing of bookkeeping and payroll matters.

How we can help

As you can see, there are a number of different opportunities available to increase law firm profitability.

This article only really scratches the surface of ways to maximise profitability. There is no “one size fits all” approach, but some answers are easier than others and some objectives are easier to achieve, whilst others can take longer.

More from our legal sector experts

You can find all of our latest legal sector news and newsletters here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Simon Bladen Partner

Simon Bladen is the partner responsible for looking after the firm’s legal clients and has worked at Hawsons throughout his career. For more information or advice on anything covered in this article, please contact Simon on [email protected] or 0114 226 7141.[/author_info]

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Care home Minimum Wage and Living Wage update

Care home Minimum Wage and Living Wage update

The government announced increases to the National Minimum Wage, effective 1 October 2016, after accepting recommendations for the new rates from the Low Pay Commission (LPC).

The main National Minimum Wage rate (for 21- 24 year olds) will rise by 3.7% from £6.70 to £6.95 per hour. This is an important issue for the care sector and follows the recent introduction of the new National Living Wage, from April 2016, and a rise in the National Minimum Wage in October 2015.

The National Minimum Wage rates will increase from 1 October 2016 as follows:

Current rate Rate from 1 October 2016
21-24 year olds £6.70 £6.95
18-20 year olds £5.30 £5.55
16-17 year olds £3.87 £4.00
Apprentice rate* £3.30 £3.40

*This apprentice rate is for apprentices aged 16 to 18 and those aged 19 or over who are in their first year. All other apprentices are entitled to the National Minimum Wage for their age.

A four-step checklist for employers following the announcement:

  • Know the correct rate of pay (including the National Living Wage)
  • Find out which staff are eligible which rates
  • Update the company payroll in time for 1 October 2016
  • Communicate the changes to staff as soon as possible

Moving forward – more compliance for employers

A government review has concluded that both the National Minimum Wage and the National Living Wage rates will increase from the same effective date come April 2017, rather than the usual October change for the National Minimum Wage.

This is a positive change, but does mean that the above rates will only be effective up until 31 March 2017.

Following the introduction of the new National Living Wage in April 2016, this will see be the fourth round of wage increases (in some form) in just two years. It is therefore unsurprising to see that many small (and indeed large) business owners are finding running their payroll an increasingly complex and time-consuming task. The compliance obligation on employers has never been greater and there has never been a better time to consider outsourcing your payroll.

Care sector threatened with fines

The government has recently published a report on paying the National Minimum Wage (entitled ‘ensuring employers comply with National Minimum Wage regulations’) and has singled out the care sector as a consistent offender of non-compliance. The report also revealed that the Low Pay Commission continues to assess it as ‘high risk’ for failing to pay workers correctly.

The National Living Wage – an update from the care sector

In contrast, a couple of months on from the introduction of the new National Living Wage and it is good to see many care operators using the new rates in a positive way. What we have seen is that maintaining the wage differentials between domestic staff and nursing staff is the right thing to do and this being implemented across a number of different homes.

In addition to this – which may perhaps be surprising to some given ongoing financial constraints – what we are also seeing is that where two employees are carrying out the same roles but one is 24 years old and the other is 26, for example, the living wage is being paid to both, even though the 24-year-old doesn’t technically qualify for the new rates.

Essentially, employers are recognising that if they want to keep their staff motivated and with a sense of value then the differentials will need to be maintained.

More from our care sector experts

You can also find all of our latest care sector news and newsletters here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Scott Sanderson

Scott Sanderson Partner

Scott Sanderson began his career with Hawsons and trained as a Chartered Accountant, becoming a partner in 2015, specialising in the healthcare sector and small businesses. For more details and advice, please contact Scott on [email protected] or 0114 266 7141.[/author_info]

Logistics Report 2016

Logistics Report 2016

Logistics Report 2016 – shifts in activity, demand, costs & regulation

The long-awaited FTA Logistics Report 2016 has now been published. The FTA Logistics Report is published each year, providing detailed analysis of the key events, trends and news in the sector over the previous 12 months.

David Wells, Chief Executive of the FTA, said: “This year’s report highlights the contradiction inherent in the UK economy; on the one hand we are doing well, with increased consumer confidence driving up the demand for goods and services but, on the other hand, we would be foolish to ignore the significant economic headwinds that are building, especially with regards to the emerging economies.”

You can download the full FTA Logistics Report 2016 here.

In this article we summarise the key aspects of the report and what they mean for the logistics sector.

Logistics activity – cautiously optimistic

As the graphic on the left-hand side highlights air freight, vans and HGVs saw an increase in activity in 2015, whilst rail freight saw a significant decrease. Those retail and the related distribution and haulage operators saw the biggest increases in activity in 2015, particularly as online sales continued on an upward trend.

Incidentally, over 370,000 new vans were registered in 2015 – 60% more than in 1994, highlighting the need and demand for that particular logistics sector. Unsurprisingly, with the growth of online sales showing no signs of slowing down, those were the firms that were the most optimistic about the year to come.

On the other hand, as the decline in steel production continues and coal-burning power plants begin to be phased out, rail freight operators are likely to be very tentative about the remainder of 2016.

FTA logistics

Logistics costs – not much change

The FTA Logistics Report also included the annual the FTA Logistics Industry Survey – which had 340 respondents – and found that input costs in 2015 saw moderate increases (compared to 2014), with the exception of fuel costs.

Wage rates were the input cost that saw the biggest increase in 2015. As well as general salary rises, increases in the National Minimum Wage in October 2014 and again in October 2015, as well as the continued implementation of auto enrolment, impacted a high number of operators.

Other costs, such as maintenance and insurance, also saw small increases.

Of the logistics input costs that decreased, the continued freeze in fuel duty and the significant falls in the price of a barrel of oil in 2015 helped to reduce the impact of fuel price volatility.

Top three actions for the government to take

Responses to the FTA Logistics Industry survey also provided the top three actions they would like the government to take:

  • Invest in road improvements
  • Recognise the essential role of logistics in the economy
  • Cut fuel duty

Other key findings

  • The number of fatal accidents per billion lorry miles fell by 3.5% – a figure which is 43% lower than a decade ago
  • A stronger economy is leading to increased demand for logistics
  • The skills shortage remains a major issue for logistics – average age of lorry driver has increased from 45.3 to 48 since 2001
  • There continues to be a fundamental change in the way we shop and the way we move goods (more sales online)

We will comment as the matter develops.

More from our transport and logistics experts

You can find all of our latest transport and logistics sector news and newsletters here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Paul Wormald is a partner at Hawsons, working in the Doncaster office. He worked previously with two national firms of Chartered Accountants prior to joining Hawsons in 2001. For more information or advice on anything covered in this article, please contact Paul on [email protected] or 01302 367 262.[/author_info]

Challenges for UK small businesses in 2016

Challenges for UK small businesses in 2016

Challenges for UK small businesses in 2016

Starting up and running a small business is a challenging process and there are many aspects an owner must consider. There are a number of challenges facing UK small business owners and it is essential owners understand the potential implications each may have on their business. This article summarises some of the key challenges facing UK small businesses today.

Small business tax

Tax is often one of the largest single costs a small business has to meet and business owners, sole traders and entrepreneurs are rightly anxious to minimise their tax liabilities, particularly in an increasingly competitive commercial environment.

Tax isn’t the most exciting part of running your own business, and most small business owners find tax a complicated burden that distracts from getting on with real work, but it is vital small businesses ensure that they are able to take advantage of any tax breaks.

Some things to consider:

  • Is your new business set up using the most appropriate trading structure?
  • Are you eligible to receive R&D tax relief for your research and development?
  • Can you claim tax relief on the purchase of new machinery or equipment?

It can be difficult to know exactly with tax rules apply to you and your business, so speak seek professional advice.

Brexit

The EU has certainly had a significant influence on the UK tax system, perhaps most notably with regard to VAT. So what happens next? Will the Brexit vote result in a complete overhaul of UK tax as we know it?

Read our article on the potential tax implications of Brexit here.

Cyber security and data protection

As small business in nearly every commercial sector start to rely more and more on technology, now might be the time to review your data protection procedures and implement appropriate changes. Recent government estimates suggest that a data breach costs SMEs an average of £310,000.

Additionally, with the new EU General Data Protection Regulation (GDPR) finally released, in April 2016, – which apply to any organisations that hold personal data – small businesses will need to start planning ahead and preparing for the changes. Data protection errors will now be far more expensive than ever before.

Find out more about the new GDPR data protection rules here.

Rising wage rates and increasing payroll costs

As well as yearly National Minimum Wage increases, small businesses are going to be the hardest hit by the introduction of the new National Living Wage. Whatever sector they operate within, small businesses often employ staff working on the National Minimum Wage, so it is not surprising that payroll costs have risen significantly in recent months and years. On the back of The Pensions Regulator fining Swindon Town Football Company £22,900 after it failed to comply with auto enrolment, this is also a worthwhile and needed reminder about preparing for your auto enrolment duties.

Register for one of our free monthly auto enrolment workshops here.

Payroll errors

While certain costs – like the new National Living Wage and the onset of auto enrolment – are out of your control, there are other areas where you can make savings. Reducing the number of payroll errors is one of those key areas. Managing an efficient payroll can be a daunting prospect, but payroll is something that employers must get right. Recent research, however, shows that small businesses are being hit hard by a crackdown on payroll mistakes.

The research found that HMRC has collected £737m from investigations into companies over tax avoidance and errors relating to employer compliance. Of that total, small businesses account for more than half (£373.4m) of the additional sums collected, despite larger businesses making up 89% of total UK payroll.

Determining your business’ correct payroll position can be a complex process and, with more casual workers, ongoing changes in wage rates and the continued implementation of auto enrolment small businesses are being caught out.

Beyond the financial implications, payroll errors can be costly for small businesses – it can be detrimental to staff morale, effect productivity and ultimately impact upon business performance. If your small business is struggling with the ever-increasing compliance obligation on employers it may be time to consider outsourcing your payroll matters. This can be an affordable and effective option for your business.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Scott Sanderson

Scott Sanderson Partner

Scott Sanderson began his career with Hawsons and trained as a Chartered Accountant, becoming a partner in 2015, specialising in the healthcare sector and small businesses. For more details and advice, please contact Scott on [email protected] or 0114 266 7141.[/author_info]