A mid-year health check: Top considerations for SMEs

Six months into 2023 businesses are continuing to grapple with the energy crisis, budget changes and other business challenges. Matthew Barton discusses key business considerations for a mid-year business health check.

There’s no doubt that the past few years have been a challenging time for owner-managers. From Brexit to COVID to the last year or so seeing continuously higher energy bills affecting all businesses, not least those in energy and trade intensive industries.

Further support for energy and trade intensive businesses was announced earlier this year under the Energy Bills Discount Scheme (EBDS), extending a crucial lifeline. Yet, with less than 90 days to apply, many businesses remain unaware of this option. 

Going into the second half of 2023, businesses should be aware of the options and support on offer. Whether that be discount schemes, tax reliefs, grant funding or recruitment and retention strategies.

Here is a round up of some business options and updates to consider, standing you and your business in good stead for whatever the rest of 2023 holds.

Energy Bills Discount Scheme

The Energy Bills Discount Scheme (EBDS) replaces the Energy Bill Relief Scheme and is focuses on businesses operating in energy and trade intensive industries.

If you’re a business, charity, school, hospital or care home then you could qualify for the EBDS as long as you qualify as energy and trade intensive and you’re either:

• on a fixed price that was agreed on or after 1 December 2021
• you have signed a new fixed price rate contract or;
• on a variable or flexible tariff/contract.

HMRC determines energy and trade intensive industries by how exposed a sector is to high electricity and gas costs compared to the Gross Value Added score (GVA). To qualify, your sector needs to be within what is considered a top 20 percent energy intensive sector. Similarly, if you are trade intensive, your sector needs to be within the top 40 percent of trade intensive sectors to qualify for support. HMRC have an extensive list of qualifying sectors on their website where you can check.

As energy prices remain high for all businesses across the UK, this could be a valuable resource in ensuring that you free up extra cashflow. With less than 90 days to apply for the scheme, find out more on the government website and apply here.

Grants and reliefs

Energy support isn’t the only thing front of mind when it comes to improving cashflow. As businesses are continuing to navigate the energy crisis, many owner-managers are rightfully looking to other sources of income. However, many businesses remain unaware of the true impact of tax incentives and reliefs.

Innovate UK smart grants

Smart grants such as Innovate UK can be a great way of injecting extra cashflow into your business for the work you are either already carrying out or plan to do. Innovate UK invests in scientific research conducted within the UK, backed by the government. SMEs could get a cashflow injection.

Research and Development

Research and Development rewards businesses financially for their innovative projects through tax relief. No matter what industry you operate in, the qualifying terms are specific to how you’re advancing scientific or technological knowledge. And with extra care now required when submitting a claim in the way of information and compliance, it’s best to consult a specialist to discuss how your project qualifies and if you are doing claims already whether your current process is compliant.

Patent Box

Additionally, Patent Box is another tax relief available if you’re already innovating, hold a patent or are eligible to hold one. If you qualify, Patent Box offers a generous tax relief in the way of just 10 percent corporation tax liability on the profits generated from the commercialisation of your patented product or process.

Recruitment and retention

Recruitment and retention remain high on many businesses’ list of priorities this year.

Having a great rewards package is a great starting point if you're looking to incentivise potential and current employees. 

Other areas to consider are your interviewing style, your business' progression structure and really delving into the reasons why people stay in your business. Employee surveys are a good option to get a comprehensive overview of these areas. Knowing what your options are for offering benefits in kind is a great starting point.

Thinking about your business structure and how it benefits your employees is another option. One structure you could consider is an EMI ( Enterprise Management Incentive) scheme.

EMI schemes offer your employees equity participation in your business if specific conditions are met. The legal agreement is often tied to continuous employment, encouraging more investment from your employees. EMIs align business and employee goals through tying a financial award to input and participation whilst encouraging a high retention rate.

EMIs are supported by HMRC, and can be easily set up by a qualified tax advisor, as long as you meet the specific criteria. It’s always worth checking qualifying requirements and tax benefits with an advisor.

Staying in the loop

In the ever-changing world of business, it can be hard to stay in the loop of constant legislation changes, government deadlines and policies.

Self-serve time to pay for VAT

As of 31 May 2023, VAT registered businesses owing less than £20,000 of VAT are now able to pay online via a payment plan or pay agreements. In order to use this, you must have filed your latest VAT return, be within 28 days of the payment deadline and you don’t have any debts with HMRC.

Increased corporation tax

Corporation tax has changed for businesses generating profits above £250,000 from 19 percent to 25 percent.

HMRC’s VAT registration helpline is scrapped

HMRC have recently decided to close their VAT registration helpline. The decision comes after 85 percent of inbound calls to the line were from traders chasing their application progress.

Supporting you and your business

Navigating constant changes whilst juggling your day to day can be challenging. Our advisors are on hand to provide tailored advice to you and your business circumstances to stand you in good stead for the rest of 2023.