Business News Wales – Christmas edition

Written 12 December 2022

Ministers to review late payments to small businesses

Small businesses routinely suffer from late payments from businesses they supply, which can lead to cash flow problems, putting their firms at risk and preventing them from growing. The majority of small businesses do not have large balance sheets and cannot accommodate long payment terms or delays to receiving payment within their cash flow cycle. Significant time and resources are spent on chasing late payments.

The Payment and Cash Flow review will scrutinise existing payment practices and the measures in place to make sure small firms are not ripped off by their larger clients – with over £23.4 billion currently owed in outstanding invoices to UK businesses.

The review will consider the progress made in specific sectors of the economy in combatting late payment and will also include an in-depth examination of current payment reporting regulations and the Prompt Payment Code.

In addition, the statutory review of the Small Business Commissioner will help to ensure that the UK has the right arrangements in place to support small businesses.

If you are concerned about the future of your cash flows, then take some time to reflect on where you are and what could happen in the next few months. It is now vitally important for all businesses to plan ahead for a range of scenarios. Cash flow and business planning in these uncertain times may appear difficult but there are some practical steps you can take to minimise potential disruption to your business.

• Review your Budgets and set realistic and achievable targets for 2023.
• Get your employees involved in a discussion of likely trading conditions and get their input on reducing costs and maintaining revenues. 
• Review and flowchart the main processes in your business (e.g. Sales processing, order fulfilment, shipping etc.) and challenge the need for each step.
• Put extra effort into making sure your relationships with your customers are solid.

• Review your list of products and services and eliminate those that are unprofitable or not core products/services.
• Pull everyone together to explain the business strategy and get their buy-in.

Tax Free Christmas Gifts To Staff

This is a timely reminder that employers may make small tax-free gifts to employees and directors if all of the following conditions apply:

• The cost to the employer is £50 or less
• It is not cash or a cash voucher
• It is not a reward for their work or performance
• There is no contractual entitlement
• It is not provided as part of a salary sacrifice arrangement

This is known as the ‘trivial benefit’ exemption. Employers do not need to pay tax or National Insurance or let HMRC know, however, they need to keep a record of the gifts should HMRC request the details.

The gift could, for example, be a Christmas Turkey, hamper or a few bottles of wine. Many employers provide vouchers from retailers such as Marks and Spencer or John Lewis so that their staff can choose their own gifts. These are regarded as non-cash vouchers and would fit within the exemption. If the cost to the employer exceeds £50 then the whole amount is taxable.

Note that directors of ‘close’ companies can’t receive trivial benefits worth more than £300 in total per tax year. A ‘close’ company is a limited company that, broadly, is run by 5 or fewer shareholders or any number of directors.

Staff Christmas Parties

For the last couple of years during the Covid-19 pandemic many businesses put on “virtual” Christmas parties for their employees and HMRC agreed that would be acceptable and that the exemption from tax would continue to apply.

There continues to be no taxable benefit for employees provided that all staff are invited, and the cost does not exceed £150 a head, inclusive of VAT.

The £150 per head limit applies to a tax year, so if you have also had an annual summer event then provided the combined cost of the two events is no more than £150 a head there would be no taxable benefit in kind. If however the summer event cost £80 a head and the Christmas party £100 a head only one event would qualify for the exemption.

Employees to be able to request flexible working on day one of employment

Millions of employees will be able to request flexible working from day one of their employment, under new government plans to make flexible working the default.

Flexible working doesn’t just mean a combination of working from home and in the office – it can mean employees making use of job-sharing, flexitime, and working compressed, annualised, or staggered hours.

The new measures will give employees greater access to flexibility over where, when, and how they work, and the government hopes will lead to happier, more productive staff. Flexible working has been found to help employees balance their work and home life, especially supporting those who have commitments or responsibilities such as caring for children or vulnerable people.

Last week’s announcement came alongside new laws coming into effect that will allow Britain’s lowest paid workers to work more flexibly and boost their income through extra work.

The measures the government is committing to will:

• remove the 26-week qualifying period before employees can request flexible working, making it a day-one right;
• require employers to consult with their employees, as a means of exploring the available options, before rejecting a flexible working request;
• allow employees to make 2 flexible working requests in any 12-month period;
• require employers to respond to requests within 2 months, down from 3; and
• remove the requirement for employees to set out how the effects of their flexible working request might be dealt with by their employer.

The day one right to request flexible working will be delivered through secondary legislation, with the other policies being introduced in the Employment Relations (Flexible Working) Bill.

The government will also commit to non-legislative action: developing guidance to raise awareness and understanding of how to make and administer temporary requests for flexible working; and launching a call for evidence to better understand how informal flexible working operates in practice.

Plan around expected Royal Mail strike action