It’s been an interesting three years since the 2016 referendum, with the next ten years promising more of the same. Below, Erica evaluates Boris Johnson’s Withdrawal Bill and its implications for UK businesses as well as the society we live in.
1. Diversity of thought is key to long-term success moving ahead
Narrow bands of interest and self-interest don’t create a vibrant society, nor a thriving business. Diversity has to include different thinkers, different ethnicities, ages, gender, problem solvers. Those companies, authorities and organisations who can’t embrace and harness this will become moribund. And rightly so.
2. Digital and real-world complementarity is critical
At the moment we have no idea what any post-Brexit trade deals will look like. Developing aligned business models and associated revenue streams is vital. With entertainment, retail and business services moving increasingly online, reducing trading frictions by evolving new digital services and products from real-world trade is vital. And for those only online, there is a rich opportunity to consider how an IRL leisure or experiential offering can enhance your bottom line. After all, there is space in abundance available in every single UK high street.
3. Environmental responsibility – get with the programme
In the current Withdrawal Bill, climate and environmental alignment with the EU has been shifted to future trade agreements. That might be fine to discuss then, but your clients and customers will be expecting it from you now. This is not an option.
Responsibility has to be taken at every step in the commercial process and, increasingly, will be an influencing factor in every personal purchasing decision. Get your supply chain to sign up to sustainability/ethical mandates now to gain early mover advantages and positioning to enable trade within even the strictest global environmental trade frameworks. Sustainability should be as important to your business and as measurable as profitability.
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4. Uncertainty is the new certainty
Nothing is certain over the next few weeks… who will be in power? The next few months… in or out?
So you need to understand what deep uncertainty means for your business, your customers and your own personal circumstances. Be prepared to pivot, to take advantage of short term opportunities, to revel in the unexpected. What could this uncertainty allow you to unlock in your relationship with your past/present clients? Where will it allow you to find future clients? What could you develop with or for your competitors? And where might you find new buyers in differing marketplaces you had not looked to before?
And if you are not in the D2C world – look out of the window to ask what you can sell to that person walking past? Thinking the unthinkable has to be part of your new strategy.
5. Tough trading breeds new opportunities
The British are inventive people. Everyone who lives in this wayward nation contributes to its determinedly individualistic approach. We lead the world in creativity – in fact it makes up £101.5bn GVA, the second-highest sector in the economy. In times of economic retrenchment and difficulties that may lie ahead, there will be the potential for green shoots to force their way through, for businesses to grow and develop in unlikely sectors and unexpected ways.
In the 2007/8 recession, people delayed big-ticket purchases and cut back on eating out. This saw a rise in small spends - cupcakes, lip-sticks, feel-good treats. Home baking and entertainment surged with businesses that could supply this ‘batten down the hatches’ mood benefitting. The emergence of shows like The Great British Bake-Off first screened in 2010 after 18 months in development and production captured this back-to-basics mood. Now a highly profitable global tv format sold across many countries, it illustrates how there are opportunities in even the most trying economic circumstances.
As the next few weeks and months unfold, focus on these five points in both your business and personal dealings. Keep your mind alive to opportunities, inventive thinking and potential pivots. Living with uncertainty is something we’re all getting used to within our own lives, the UK economy and planet as a whole. So embrace it and turn it into positive actions build a commercially inventive road ahead.
About Erica Wolfe-Murray:
Cited by Forbes.com as ‘a leading innovation and growth expert’ Erica Wolfe-Murray runs innovation studio, Lola Media Ltd. With creative head and FD experience, she focuses on auditing intellectual assets/IP to evolve new products & services from a company’s existing business.
She is also the author of ‘Simple Tips, Smart Ideas : Build a Bigger, Better Business’ aimed at the UK’s 10m+ micro business & freelance sector to help build greater commercial resilience in this dynamic but often ignored part of the economy.
That possibility has pushed many government bond yields to new lows in recent weeks, while global equity prices have been volatile. Below Rhys Herbert, Senior Economist, Lloyds Bank Commercial Banking looks at the evidence.
And while some economic data might be confusing, I think there is a clear message.
First, that global economic growth has slowed and may slow further, and second, that there is a pronounced difference between weak or even falling activity in the manufacturing sector and still relatively buoyant service sector.
So, what might be causing this?
Manufacturing v services
It seems probable that the manufacturing sector is being hurt by the ongoing trade dispute between the US and China. Indeed, the US manufacturing sector is now in decline for the first time in a decade.
And the Bank of England (BOE) flagged last week that, because the trade war between the US and China had intensified over the summer, the outlook for global growth has weakened.
The Bank’s Monetary Policy Committee added that the trade war was having a material negative impact on global business investment too.
The main impact is on confidence - or more accurately lack of confidence – which is holding manufacturers back from investing. As a result, we’ve seen a slowdown in world trade and in demand for manufactured goods.
In contrast, demand for services is being supported by relatively buoyant consumer spending. Yes, consumers are probably reluctant to splash out on big ticket items like cars right now, but overall, they are still willing to spend.
Consumers are probably reluctant to splash out on big ticket items like cars right now, but overall, they are still willing to spend.
The central conundrum
The key question going forward is whether it is more likely that manufacturing rebounds or that service weaken from here?
That is the conundrum that central banks need to weigh up in setting policy.
So far, the majority have decided that they are sufficiently concerned about the downside risks to take out some insurance and adopt policies designed to support economic growth.
Back in July, the US Federal Reserve did something it had not done for over a decade. It reduced interest rates – by a quarter point to 2.25% (upper bound).
It was widely seen as an insurance move against increasing global economic headwinds, emanating mainly from the US-China trade dispute.
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It repeated the move last month, lowering the target range for its key interest rate by 25 points to between 1.75% and 2%. The accompanying statement repeated July’s message that, while economic conditions are probably sound, a bit of insurance against downside risk was advisable.
Meanwhile, in his penultimate meeting in September, this month, European Central Bank President Mario Draghi announced a package of stimulus measures including a reduction in its deposit rate to a record low of -0.5% and the introduction of a two-tier system to exempt part of banks’ excess liquidity from negative rates.
He also announced a resumption of the bond-buying programme at €20bn a month from November and, importantly, signalled no end date to purchases.
Draghi can argue that the weak Eurozone PMI suggests the economy is stagnating, supporting this action.
But the UK has not followed this strategy.
On the sidelines
The BOE is still wary enough about potential inflationary pressures from a tight labour market and rising wage growth to talk about the possibility of interest rates needing to go up.
But last month, the BOE concluded that the longer that uncertainty goes on, the more likely it is that growth will slow, especially given the weak global economy.
We will see if the message changes, but the likelihood is that BOE rate setters will want to continue to remain on the sidelines and keep rates unchanged at 0.75%, not least because the Brexit outcome remains unsettled.
The government’s official preferred Brexit position is for a deal and that assumption in the Bank’s forecast points to interest rates rising “at a gradual pace and to a limited extent”.
But the BOE also noted growing concerns about risks to growth, joining the US Federal Reserve and the European Central Bank, which both seem to have decided that risks are skewed to the downside.
But, while escalating tariff wars, slowing growth in the US and China and Brexit uncertainty mean there are credible reasons to worry that 10 years of steady expansion could be coming to an end, it is still far from certain that the current slowdown means a recession is looming.
QuickQuid, the UK's largest remaining payday lender has revealed that it will close down, with US-based owners, Enova, stating that regulatory uncertainty being the key reason for their decision. Whilst the UK payday lending market has taken advantage of the most vulnerable consumers for too long, a question mark looms over the lending industry in the UK.
FairMoney.com have unveiled that 10.5 million Britons are in the worst financial position ever, with 53% stating that they have a weekly disposable income of less than £0. With the continual failings of the peer-to-peer market, and the long overdue closing of payday lenders in the UK, Britons need access to fair finance. Businesses such as FairMoney.com provide valuable consumer services by providing comparisons for a variety of loan sizes, with the most accommodation interest rates.
Dr Roger Gewolb, Executive Chairman and Founder of FairMoney.com, has commented on the closure of QuickQuid and provides financial advice for those 10.5 million Britons experiencing their worst financial position: “Both the payday loan industry and the relatively new 10 year old peer-to-peer lending industry are vital for consumers, especially that segment of the population that cannot easily obtain credit.
“The excesses and exploitation of the payday loans industry were finally curbed by legislation in Jan 2015, in part due to FairMoney.com and the Campaign for Fair Finance’s efforts, and the rates now charged and lenders’ terms are now fairer, even though this has caused some 70% of the industry to go out of business.
“In the same way, we want the P2P lending industry to survive and prosper, and have no more of these dreadful, drastic, dramatic failures, for the people who cannot readily get money from the banks and also for investor/depositors with extra cash who can get a higher interest rate than what is available from the banks, all as originally intended. I would not be surprised if a major P2P platform collapsed before Christmas, highlighting the risks that investors and consumers could be undertaking. Proper regulation and supervision by the Bank of England will ensure no more failures and that the industry can be properly realigned, hopefully without a huge chunk of it disappearing as with payday.”
Sharing personal data with organisations in the EU is essential to thousands of SMEs, and we know that the financial services sector is one of those that is most reliant.
When the UK leaves the EU, it will become what is known as a 'third country' under the EU’s data protection laws.
This means that UK and EU/EEA organisations will need to take necessary action to ensure that personal data transfers from organisations in Europe to the UK are lawful.
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The benefits of taking action now means UK organisations won’t be at risk of losing access to the personal data they need to operate such as names, addresses or payroll details.
Financial service businesses should review their contracts relating to these personal data flows. Where absent, they need to update their contracts with additional clauses so that they can continue to receive personal data legally from the EU/EEA after Brexit.
For most financial service businesses, this will not be expensive and will not always require specialist advice.
Digital Secretary Nicky Morgan said: “If you receive personal data from the EU, you may need to update your contracts with European suppliers or partners to continue receiving this data legally after Brexit.
“So, I am urging all businesses and organisations to check and ensure they are ready for Brexit.
“There are simple safeguards you can put in place by following the guidance available. UK and EU businesses should get on the front foot and act now to avoid any unnecessary disruption.”
It would seem that the dawn of the electric car is finally upon us, with the Tesla Model 3 recording the third biggest number of UK registrations in August.
Figures from the Society of Motor Manufacturers and Traders (SMMT) show that the model muscled its way into the top 3 with 2,082 units registered in that month.
Well, it’s fair to say that more than a pinch of salt is required when assessing the reasons behind such a sudden ascent.
On the face of it, the model’s growing popularity surpassed that of household models including the Ford Focus, the Vauxhall Corsa and the Mercedes-Benz A-Class, with only the Ford Fiesta and the Volkswagen Golf having more registrations in the month.
For a car that only began production in 2017, it’s an impressive effort. Furthermore, it would seem that the rise of the Model 3 has had an impressive impact on EV registrations overall, with sales of battery electric cars almost doubling year on year in the 12 months to August, from 9,000 in 2018 to 17,393 this year.
So, has the electric dream finally been realised and should you now be considering EVs for your next car? Have you got that salt handy?
As ever, it’s all about context. The current trials and tribulations faced by the motor sector have been well documented and it’s perhaps here where the real reasons for the Model 3’s impressive August SMMT figures lie.
The numbers show that the market as a whole saw new registrations dip by 1.6% to 92,573 in August. However, the context to bear in mind here is that August is traditionally a quiet month for registrations as the market’s emphasis shifts to the new September number plate. However, that doesn’t account for the 1,500 fewer registrations in August compared to the same month last year.
So how is Tesla bucking the trend? Has the EV manufacturer weathered the choppy seas of negative PR, only to be welcomed onto dry land to a cacophony of positive headlines?
Not quite. Those journalists perceptive enough to understand how registrations work and the delays that have dogged the production of the Tesla Model 3 have a slightly different take.
The model is perhaps making up for lost time. James Baggot, founder of Car Dealer Magazine, put it best when he said: “It’s worth noting that the SMMT registration figures relate to cars registered, not sold, in the month. Most Tesla Model 3 buyers put down their deposits years ago, so this is simply Tesla finally delivering a car they promised back in 2016.
“This was effectively the first full month of deliveries for the Model 3 in the UK. It has also caused an abnormal blip in the SMMT stats – electric cars are up considerably, but it’s unlikely to be something that will continue.”
So, with current market conditions perhaps flattering the Model 3’s perceived popularity in August, we may have to wait a little longer until the electric revolution is truly upon us. And, of-course, while pure-electric sales are on the up, they only represent a tiny 1.1% minority of annual car sales.
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However, it can be said that the industry has made huge strides in 2019. Car makers are now beginning to catch up as the pressure to move away from fossil fuels continues to mount, suggesting that prices for electric cars could also begin to fall.
Jaguar’s I-Pace sports utility vehicle won the world car of the year award this year, Nissan is finally beginning to talk about its new EV cross-over following the huge success of the Leaf, BMW has high hopes for its new electric Mini, while Volkswagen has been spotted testing its all-electric ID 4 SUV, one of the first EV’s in its much talked about ID series.
With Government emission targets not going away, the pressure on the industry remains. It will be interesting to see whether Tesla can stay in the headlines, for the right reasons.
When it comes to property investment in the United Kingdom, Simon Nosworthy of Osbornes Law Firm believes that the housing market has already pre-adjusted for Brexit, according to The Sun. Investors who decide to pick up properties before, during or after Brexit may be grabbing bargains that they can sell for big profits when the market recovers.
While property investment in the UK is currently subject to a lot of uncertainty and has its pros and cons, there will be investors who read the property investment landscape perfectly and then make a mint.
Look at the bright side
Buying property has many advantages (capital growth over time and/or rental income), provided quality properties in good locations are chosen. The UK real estate market shifts, but savvy investors know when to get into the market and when to get out. Since prices have dipped a bit due to Brexit uncertainty, there are valuable properties available which are cheaper than they normally would be. These properties may increase in value once Brexit issues are finally resolved. Whether you’re interested in buying a home or flat and renting it out to make cash, or investing in commercial real estate, the silver lining in Brexit uncertainty is that deals are out there. If you’re interested in buying, know the risks and choose a property or properties with the utmost care.
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Know the risks and choose carefully
To boost the odds of a successful property investment, you should examine prospective properties with a fine-tooth comb. Properties should be in locations that are in demand or growing more popular. Properties should be in good condition, and tests will be needed, as visually inspecting a property on your own isn’t enough. It’s wise to pay for surface and air inspections that determine whether mold is present. You should also pay inspectors to determine whether homes or commercial properties have other issues, such as structural defects or water damage. Mold remediation is possible and should not break the bank, but issues with structural integrity and water damage may cost a lot to fix and cut into profits when you resell.
Prepare to be patient
Short-term flips are always an option, but current real estate market conditions point to playing the long-term property investment game. Buy undervalued properties on the cheap and hang onto them, so you can make good money when you sell them once the Brexit dust settles. Rent a property while the UK adjusts to a new reality, and prepare for the future: when the market rebounds and you’ll be able to sell with great results.
The pros of UK property investment in the age of Brexit, such as lower real estate prices and the possibility of big profits in the future, are balanced by the uncertainty and risk that Brexit brings. Weigh the pros and cons before making a play in the real estate market.
Commercial finance intermediaries are divided on Brexit. One out of four respondents consider it a key challenge, while one fifth believe that it will bring new business opportunities. However, commercial finance intermediaries have a positive future outlook. 77% of respondents believe that the number of loans they broker will increase; more than half of these even go so far to say that they believe it will rise by a lot.
According to recent statistics from UK Finance, conducted with the support of industry organisations NACFB and FIBA, UK lenders approved over 290,000 loans and overdrafts to small and medium-sized businesses (SMEs) in 2018, worth £28 billion in total. Commercial finance intermediaries, including brokers, accountants and business advisers, are often the invisible hand in these transactions. They play a crucial role in helping UK businesses source the right funding from all the different options offered.
However, despite the healthy size of the SME loan market in the UK there is still a £22 billion funding gap, with many businesses struggling to obtain capital for their needs , according to the Bank of England. What’s more, recent stats from the British Business Bank highlight the importance of commercial finance intermediaries stating that businesses receiving external support when looking for funding are 25% more likely to become high-growth companies.
Commenting on the survey findings, Niels Turfboer, managing director at Spotcap, said: “Commercial finance intermediaries are an important part of the SME funding jigsaw. The survey insights show that there is a lot of potential for them to help fill the £22 billion funding gap. The more adaptable and open-minded to change intermediaries – and lenders – are, the better and faster they can compete and grow their business.”
Adam Tyler, the executive chairman at FIBA, the Financial Intermediary & Broker Association, adds: "We benefit hugely from such a wide range of lenders and to know that SMEs are still not aware of the choice is very disappointing. My own research has revealed similar shortfalls and the more we can do collectively, the more small businesses can get the funding they require."
Graham Toy, CEO of the National Association of Commercial Finance Brokers, responded to the findings: “The research chimes with our own view of the commercial finance broker’s role in supporting and advising business borrowers. Brokers have a positive outlook partly because they remain instinctively agile, with many of them having weathered the unpredictability of a post-2008 world.”
Importantly, the political situation does not accurately reflect the current state of affairs in other sectors of the economy. Jerald Solis, Business Development and Acquisitions Director at Experience Invest works closely with international investors, and he says it’s reassuring to see that UK property, be it commercial or residential, is still held in high regard.
In the first half of 2017, and less than a year following the EU referendum, the UK made up 14% of global commercial property investment transactions. This was second only to the US and tells us that international investors evidently were not letting the prospect of Brexit impact their long-term real estate investment strategies. Meanwhile, total investment volumes into the UK’s multifamily residential sector rose by more than 150% to reach $7.6 billion in 2018.
So, what is it about UK property that holds global interest even at the most challenging of times, and how can international investors use Brexit to support their long-term financial goals?
Why does interest in the UK market hold strong?
Currency fluctuations in the wake of the Brexit vote has had a significant influence on investment decisions. Since June 2016, the value of the pound has steadily fallen; as a result, overseas investors have found themselves enjoying more buying power, particularly within the prime property market.
With a weakened pound, overseas investors have been in the position of being able to snap up UK properties at discounted prices. According the HMRC, for instance, there was a 50% spike in the number of UK homes sold for over £10 million in the year following the vote.
The Bank of England has also cut interest rates to historic lows, encouraging investment in real estate assets. The interest rate has been held at 0.75% since August 2018, with little indication of this being raised in the near future.
Diversifying opportunities
While foreign interest in the market remains, investors’ strategies have been changing in response to Brexit. Namely, the variety of opportunities now on offer means that investors have been looking beyond the traditional remit of property investment in the UK to explore new cities and sub-sectors that offer the potential of long-term capital growth.
Historically, London has been the destination of choice for international investors. However, in recent years, investors have increasingly recognised high-growth cities and leading business destinations like Manchester, Liverpool, Leeds and Newcastle.
This is something we have witnessed first-hand at Experience Invest. Indeed, Manchester and the other so-called Northern Powerhouse cities have attracted some of the highest levels of Foreign Direct Investment of any UK region outside of London according to research from Ernst & Young.
It should come as no surprise then, that house prices in Manchester have surged; in the 12 months to July 2018, house prices rose by nearly 9%. Meanwhile, enquiries by Chinese investors alone about buy-to-let options in the city soared by 255.6% in January 2018 compared to the same month in the previous year.
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Cities like this, which are undergoing rapid regeneration, have been clear favourites in the aftermath of the Brexit vote. The reasons for this are clear; with prices in such areas typically below those seen in the capital, rental yields and capital appreciation forecasts tend to be markedly stronger.
Indeed, such cities are also home to a large student population, representing huge demand for year-round accommodation and good long-term investment prospects. This translates to another trend taking hold. Namely, overseas investors are beginning to diversify their assets, looking towards options such as Purpose-Built Student Accommodation (PBSA) that cater to growing demand for term-time accommodation. Indeed, overseas investors dominate the UK PBSA market according to Cushman & Wakefield, making up 55% of 2018 transactions.
The UK’s proven track record for delivering high-quality real estate leaves us in no doubt that international investors will continue to target the UK, albeit perhaps with a different approach. Particularly with a heavy investment in regeneration projects up and down the country, the improvements in infrastructure and connectivity, as well as the delivery of sought-after new-builds, means that the UK property market will remain a top target for investment – even if it does naturally experience an immediate post-Brexit wobble.
RS Components looked at some of the world’s richest women who saw net worth increases between 2018 and 2019 to see how long it took them to earn your wage. So which females are leading the way in business?
At aged 72, Diane Hendricks is the richest self-made woman with a net worth of $6.3 billion. Diane made her billions as Chairman of ABC Supply, a wholesale distributor of roofing.
Her hourly earning is $91,324 which is $34,808 more than the US average yearly salary.
It would take the richest self-made woman 37 minutes to earn the US average salary of $56,516 and just 28 minutes to earn the UK average salary of £35,432.
Thai Lee is the second richest self-made woman with a network of $2.1 billion and earns $1,369,863 per day, which is 24 times more than the US average yearly salary.
Thai is the CEO of SHI International, a leading IT provider which she founded in November 1989 aged 31.
The youngest self-made woman is Kylie Jenner who earns $190 every minute. Aged just 22, Kylie is already worth $1 billion. She launched her successful cosmetics company, Kylie Cosmetics in 2015.
How does your salary compare to the richest self-made women? Use RS Components’ new interactive tool to find out how long it would take them to earn your salary.
Of greater concern is the impact of late payments on the long-term health of the UK economy, which is estimated to have cost UK SMEs at least £51.5 billion in the last 12 months, but the true figure is likely to be much higher.
The new research from Hitachi Capital UK has determined the financial burden on the UK’s 5.6 million SMEs as a result of late paying customers and uncovered the extent to which an epidemic of late and unfair payments is hampering productivity and growth.
Over a quarter of SMEs (27%) have experienced a profit squeeze because of late payments, and 12% have had to defer staff pay, equating to an estimated 1.95m UK employees that are left empty-handed on payday.
With many SMEs already struggling to maintain liquidity, the research highlights the extent to which late paying customers represent a drain on resources. Around 40% of respondents have been forced to use their own money to address cash flow gaps in their business. The vast majority of these respondents (80%) have invested personal savings to keep their business afloat or operational.
Critically, the research exposed a need for SMEs to take measures to maintain cash flow over the course of the year to mitigate damage caused by unreliable customers. Nearly three quarters of SMEs (74%) have had a customer fail to pay during their agreed terms at least once during the last 12 months, and 34% of SMEs report customers using their position to delay or reduce payment.
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With 21% of SMEs also turning down a contract because a customer was known to be a bad payer or offering unfair payment terms, the use of external funding options is an increasing necessity to offer a safety net when business is stalling. Today’s research indicates that awareness of potential solutions such as invoice finance remain too low.
Robert Gordon, CEO of Hitachi Capital UK, said: “An imbalance of power between clients and suppliers, often driven by larger players abusing their position, has led to a widespread late payment culture that is damaging UK SMEs. As our research has shown, if we let this go unchecked, huge numbers of businesses will continue to experience cash flow pressures at a time of wider economic uncertainty.
“This has ramifications not only for SMEs, but for entire supply chains and a fair, competitive and supportive business environment is critical for the country’s wider economic success. It’s imperative that we not only acknowledge this issue and crack down on late payments, but also take practical steps to ensure businesses are given the required support and penalties are put in place for the worst offenders.”
The findings come amid a range of new Government measures – proposed by the previous Government but currently on hold – of tougher sanctions to address late payments, including greater powers for the Small Business Commissioner to enforce best practice and revisions to the Prompt Payment Code. Of those surveyed, over two-thirds of SMEs (68%) would support legislation making it illegal to miss a payment deadline, with over half of respondents (57%) spending nearly a day a week chasing outstanding invoices, suggesting that late payments are contributing to the productivity deficit within the UK economy.
In analysing the sector landscape, professional services was identified as one of the worst offenders, with 17% of SMEs identifying this grouping as a leading culprit for late payments.
The South East was the region with the highest proportion of SMEs reporting financial issues caused by late payments, representing 18% of the total number of responses, followed by Greater London at 16%.
Andy Dodd, Managing Director, Hitachi Capital Invoice Finance, added: “As one of the UK’s leading finance providers, we understand first-hand the impact that late payment can have. Many SMEs struggle to maintain liquidity and this remains an underlying threat to their personal finances and ultimately the survival of their businesses.
“Fortunately, there are a number of solutions available to small businesses. Firstly Invoice Finance which provides an immediate advance, normally of up to 85% of the invoice value, to provide instantaneous cashflow injection. Secondly, using a good credit control provider, perhaps aligned to Invoice Finance – it’s an area that frequently neglected, but should be front-of-mind amongst SMEs.”
A recent report in The Telegraph says businesses across the UK are losing out on billions by not claiming for R&D Tax credits.
If you are carrying out any research and development (R&D) in your business, you should be making the most of the government scheme to claim tax relief on eligible R&D spend.
In this article I’ll be highlighting the things you need to know before putting together a claim. First let’s take a look at exactly what R&D Tax credits are and what type of business can make use of the scheme.
R&D Tax Credits in a nutshell
‘R&D Tax Credits’ is the umbrella term for tax relief available to businesses that invest in developing products, services, software or processes. The key is that the R&D activities seek to achieve an advance in technology. This can be creating new products, services or processes or modifying existing ones.
Who can claim R&D Tax Relief?
Any business that meets the eligibility criteria can claim, regardless of sector. It is a common misconception that only businesses in the technology and engineering sectors can claim. This isn’t true. Eligibility criteria simply asks that:
- Your business is a Limited Company and is subject to Corporation Tax
- Your business has carried out qualifying research and development activities
- Your business has actually spent money on these projects
For the main scheme, your business also needs to be a small or medium-sized enterprise (have fewer than 500 employees), and either, a turnover of less than €100 million, or gross assets of less than €86 million. If your company has more than 500 employees, or is in partnership with another company, other rules apply under the Large Company Scheme.
The information you’ll need when making an R&D tax claim
Putting the right information together when you submit your claim to HMRC for R&D Tax Relief could make all the difference and ensure you maximise your tax break.
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Technical information
Part of the process of making a claim involves writing what is called a ‘technical narrative’. This part is really important and often the bit that companies fall down on. The technical narrative explains your project, including the features and challenges involved.
HMRC will want to see that you have looked for an advance in science or technology and sought to achieve this aim. You will need to show that your challenge could not easily be worked out by a professional in the field and that you had to overcome scientific or technological uncertainty.
The narrative needs to be written from a technical perspective, not a project management one. It needs to be technically complex and show how resource intensive your activities were. Ideally your R&D technical narrative should be 2-5 pages long.
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Details of your R&D spend
This is essentially all of the financial information related to your R&D project. You will need to know what costs can be included in your R&D Tax claim as not all costs are eligible. Costs that can be claimed are known as ‘qualifying expenditures.’ You should be able to claim for:
- Direct staff costs
- Subcontractor costs
- Externally provided worker costs
- Software costs
- Utility costs
- Payments to clinical trial participants
- Contributions to independent research
- Prototypes
There are a lot of costs you can’t claim for, even though they may have been incurred as a direct result of your R&D project.
Items you can’t claim for include travel and subsistence, recruitment agency fees, postage, stationery and freight, computer costs, capital expenditure, rent and business rates, telephone and broadband charges, server costs, professional fees and Patent attorney fees. Ideally, consult with your accountant or an R&D tax specialist to clarify the costs you can claim for.
You will need to match finances to the data in the technical narrative. If you don’t do this HMRC will almost certainly query your claim.
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Information about employees that have worked on the projects
Qualifying staff costs fall into two categories (direct and indirect). Let’s take a brief look at what this means. Direct staff expenditure refers to the costs of directly employed staff who are engaged in carrying out R&D activities.
This includes gross wages, Employer’s National Insurance Contributions and pension costs. The staff have to be company employees under a contract of employment. Directors wages can also be included if they are working on the R&D project.
As employees are unlikely to be spending all of their time on R&D, you will need to maintain timesheets or similar records to present with your claim to HMRC.
Indirect staff costs are those where employees are engaged in wholly or partly supporting those engaged directly in R&D activities. This includes clerical support and administration staff, maintenance engineers, security staff and training staff.
How long will it take for HMRC to approve?
Typically, once you’ve submitted an R&D Tax claim to HMRC, it takes around 6-8 weeks to get approved, or longer if the tax office has queries. Once approved you’ll receive either a tax rebate or a Corporation Tax deduction.
Don’t delay, start your claim today. Speak to an R&D tax specialist to find out if your project is eligible.
It seems only yesterday the Competition and Markets Authority (CMA) decreed that larger banks’ long-standing customer relationships impeded competition and innovation.
Open Banking has opened the door for third parties to access bank held account data as well as giving the ability to initiate payments from a customer’s bank. Features designed to allow new services to be delivered giving users enhanced financial services along with new, safe and secure ways to pay.
Soon these opportunities will be reflected in the rest of Europe as all banks ready themselves for a September go-live date. So what can Europe learn from Open Banking in the UK?
State of the UK
It’s well versed that Open Banking has been slow to take off in the UK. Indeed, by the time the implementation date arrived only four of the UK's nine biggest banks were ready. Nonetheless, we are now seeing some signs of impressive applications powered by Open Banking setting the standard for Europe.
The biggest challenge in the UK was that the concept and technologies used were new, resulting in a number of iterations being required to deliver products that meet market needs.
A key differentiator in the UK has been the Government introducing the Open Banking Implementation Entity that sets and polices progress.
PwC has estimated £7.2 billion in revenue will be created by Open Banking by 2022.
The European Landscape
The European landscape looks quite different. With no equivalent regulatory or policing body and no specific government drive, we are anticipating considerable variation of standards from bank to bank. Lack of consistency in how Open Banking is deployed will slow adoption as the development of new services becomes more complex and users do not receive a common experience.
To address this there are groups such as STET in France and the Berlin Group working to define standards for implementing Open Banking. There is also pressure from various banking trade bodies such as DDK in Germany pushing for commonality in standards.
The development of standards by such groups will help to create consistency, yet it still begs the question as to who will enforce regulation and uphold financial institutions to the specified due dates?
Cooperation between the banks
Naturally, the scale of this European go-live is not as straightforward as the UK’s due to the number of banks involved. Yet, it has the potential to unlock financial services and technological innovations that could position Europe as one of the leading financial regions when it comes to Open Banking.
Indeed, PwC has estimated £7.2 billion in revenue will be created by Open Banking by 2022. European banks need to view this as an opportunity to enhance banking capabilities and deliver for increasingly tech-savvy consumers both within and cross country borders.
One lesson to be learnt from the UK is that embracing Open Banking allows banks and financial institutions to innovate and deliver exceptional services to their customers.
Embracing Open Banking
And what about the wider world? In Europe, there are two aspects of Open Banking, one covering access to data and the other dealing with payments. Adoption around the rest of the world is developing at a pace, with many countries either already living with viable applications or in the process of introducing legislation. Differing areas are focusing on specific aspects of Open Banking, for instance, Australia looks more to the data usage whereas India already has a successful payment infrastructure based on these principals.
Despite the local and regional nuances affecting markets yet to go live with Open Banking, one lesson to be learnt from the UK is that embracing Open Banking allows banks and financial institutions to innovate and deliver exceptional services to their customers. Open Banking requires banks to cooperate with others to deliver the desired objectives of innovation to meet the ever-changing needs of customers.
Then, and only then, will we witness an explosion of new products and services for consumers throughout Europe and realise the true benefits of Open Banking.
