Beam Accountancy

Seeking to claw back training costs from wages is common practice. However, a recent ruling has set clearer boundaries as to how this can become an unenforceable restraint of trade. An appellant joined an IT services provider as a trainee quality assurance engineer and entered into an employment contract alongside a separate "contract of training investment" which levied a "training cost debt" of over £8,000 for mentoring and internal support.

Under the scheme, this debt would gradually be ‘paid off’ if the claimant remained with the company, although if his employment were to be terminated for any reason other than redundancy, the remaining balance was to become immediately recoverable.

The appellant resigned after 8 months to accept a better-paid role elsewhere, prompting the employer to initiate legal proceedings to recover the full sum. After initial setbacks, the appellant took his case to the Court of Appeal, arguing that such a clawback scheme constituted an unlawful restraint of trade.

The Court unanimously allowed the appeal, setting aside the previous judgements and firmly rejecting the employer's argument that an unconditional repayment obligation falls beyond the restraint of trade doctrine, as it was framed as a debt. Such financial penalties and liabilities effectively create an indirect restraint by acting as a powerful deterrent against changing employers.

The contractual clauses failed as the pernicious repayment obligation applied, regardless of the reason for departure, and were written irrespective of whether the employee moved to a higher-paid job in the same sector or left the workforce entirely. This decision has significant implications for employment law and HR practice, particularly for how organisations structure training arrangements, financial incentives, and employee retention mechanisms.

Reframing clawbacks as commercial debts rather than as traditional post-termination restrictive covenants no longer confers immunity from the doctrine of restraint of trade, and employers can no longer rely on such universal and indiscriminate repayment clauses. To be enforceable, a clawback provision must be carefully tailored and may not impose heavy financial liabilities on junior staff who are paid at or near minimum wage. From this point, employers must ensure that any training cost recovery schemes are proportionate, reflect any value already returned to the business, and do not unduly restrict an individual's freedom to change employment.

The British Business Bank has launched a £210 million investment fund to help smaller businesses in the South East of England start, develop and grow.

The South East Investment Fund will offer loans ranging from £25,000 to £2 million, together with equity investments of up to £5 million. The area covered includes Buckinghamshire, Oxfordshire, Berkshire, Hampshire, the Isle of Wight, Sussex, Surrey and Kent.

Although this particular fund is restricted to the South East, British Business Bank-backed investment funds are now operating across every UK nation and region outside London. Businesses elsewhere may therefore find that comparable sources of finance are available in their area.

The announcement provides a useful reminder that funding should form part of a business’s wider growth strategy. External finance might be used to purchase equipment, recruit employees, develop a new product, enter another market or provide additional working capital.

Before applying, the owners should be clear about how much money the business needs, what it will be used for and how the investment will improve its performance. Borrowing more than necessary increases costs, while borrowing too little may leave a project unfinished.

The choice between a loan and equity investment also requires careful consideration. A loan will normally need to be repaid with interest, but the owners retain control of the business. Equity investment does not usually require regular repayments, although the investor receives a share of the business and may have a say in important decisions.

Prospective funders are likely to expect current management accounts, financial forecasts, a business plan and evidence that the owners understand the risks involved. Preparing this information can also help management decide whether the proposed investment is commercially sensible.

If you are considering raising finance, early planning is important. We can help you assess the funding requirement, prepare forecasts and present the financial case clearly to prospective lenders or investors.

The Government has announced plans to simplify corporate reporting and reduce the administrative burden placed on UK businesses. It estimates that the proposed reforms could save businesses more than £450 million each year.

The measures are expected to include replacing some paper-based reporting with digital alternatives, simplifying existing requirements and considering how artificial intelligence could make reporting more efficient.

For many business owners, this will be welcome news. Time spent completing forms and dealing with overlapping reporting requirements is time that cannot be devoted to customers, employees or business development.

However, simpler reporting does not necessarily mean fewer responsibilities for directors. Companies will still need to maintain accurate accounting records and provide reliable information to Companies House, government departments and other interested parties.

Greater use of digital reporting may make the quality of a company’s underlying records even more important. If information is incomplete or inaccurate, moving it into a digital system will not correct the problem. It may simply allow an error to be reported more quickly.

Businesses should therefore use the proposed reforms as an opportunity to review how they collect and maintain financial and operational information. This could include checking that bookkeeping is kept up to date, supporting documents are retained and responsibility for completing statutory reports is clearly allocated.

Directors may also want to consider whether their present accounting software and internal procedures will be suitable for an increasingly digital reporting environment. Older manual processes may become harder to maintain as government systems change.

The detailed reforms will need to be examined as they are introduced. In the meantime, a well-organised accounting system remains the best foundation for meeting reporting requirements efficiently.

If you are concerned about the quality of your business records or would like help improving your accounting procedures, please speak to us.

1 October 2026 – Corporation Tax payment is due for companies with an accounting period ending 31 December 2025, unless the company is required to make quarterly instalment payments.

5 October 2026 – Deadline for notifying HMRC of a new liability to Income Tax or Capital Gains Tax for the 2025–26 tax year. This may include registering for Self Assessment if you became self-employed, started receiving taxable rental income or received other income or gains that have not already been taxed.

7 October 2026 – VAT returns and payments are normally due for accounting periods ending 31 August 2026, unless a different deadline applies. Businesses paying by Direct Debit should allow sufficient time for HMRC to collect the payment.

19 October 2026 – PAYE, employee and employer National Insurance contributions, student loan deductions and Construction Industry Scheme deductions are due for the month ended 5 October 2026 if payment is made by post.

19 October 2026 – Deadline for submitting the CIS300 monthly return for the month ended 5 October 2026.

22 October 2026 – Electronic payments of PAYE, National Insurance contributions, student loan deductions and CIS deductions are due for the month ended 5 October 2026.

22 October 2026 – Electronic payment deadline for tax and Class 1B National Insurance contributions due under a PAYE Settlement Agreement for the 2025–26 tax year. The deadline is 19 October 2026 if payment is not made electronically.

31 October 2026 – Deadline for submitting a paper Self Assessment tax return for the year ended 5 April 2026. Taxpayers who miss the paper filing deadline can normally file online by 31 January 2027 instead.

31 October 2026 – Corporation Tax returns are due for companies with an accounting period ending 31 October 2025.

31 October 2026 – Companies House accounts are due for private companies with an accounting period ending 31 January 2026. Different deadlines apply to a company’s first accounts.

31 October 2026 – Plastic Packaging Tax returns and payments are due for the quarter ended 30 September 2026 where the business is registered for the tax.

1 November 2026 – Corporation Tax payment is due for companies with an accounting period ending 31 January 2026, unless the company is required to make quarterly instalment payments.

7 November 2026 – VAT returns and payments are normally due for accounting periods ending 30 September 2026, unless a different deadline applies. Businesses paying by Direct Debit should allow sufficient time for HMRC to collect the payment.

19 November 2026 – PAYE, employee and employer National Insurance contributions, student loan deductions and Construction Industry Scheme deductions are due for the month ended 5 November 2026 if payment is made by post.

19 November 2026 – Deadline for submitting the CIS300 monthly return for the month ended 5 November 2026.

22 November 2026 – Electronic payments of PAYE, National Insurance contributions, student loan deductions and CIS deductions are due for the month ended 5 November 2026. As 22 November 2026 falls on a Sunday, businesses should arrange payment early enough for the cleared funds to reach HMRC by the deadline.

30 November 2026 – Corporation Tax returns are due for companies with an accounting period ending 30 November 2025.

30 November 2026 – Companies House accounts are due for private companies with an accounting period ending 28 February 2026. Different deadlines apply to a company’s first accounts.

Self-employed people can deduct allowable business expenses when calculating their taxable profits. However, where a cost has both a business and private element, only the business proportion can normally be claimed.

For example, if a mobile phone bill is £200 for the year, with £70 relating to business calls and £130 to personal use, only the £70 business cost can be claimed.

The same principle can apply to costs such as travel, telephone and internet bills, and other items used for both business and private purposes. Keeping appropriate records can help demonstrate how the business proportion has been calculated.

There are specific rules for people who work from home. A reasonable proportion of costs such as heating, electricity, Council Tax, rent or mortgage interest and internet and telephone use may be allowable.

The calculation should use a reasonable method for dividing the costs between business and private use. This could take account of the number of rooms used for business and the amount of time spent working from home.

Alternatively, eligible self-employed people may be able to use simplified expenses, which provide flat rates for working from home, certain vehicles and living at business premises.

Only the allowable business expenses portion should be included when calculating taxable profits.

Self-employed people can choose to use simplified expenses to calculate certain business costs using flat rates rather than working out their actual expenses.

The system can save time and make record keeping easier, but it will not necessarily produce the best tax position. It is therefore worth comparing the flat rates with the actual costs before deciding whether it suits your business.

Simplified expenses are available to sole traders and partnerships that have no companies as partners. They cannot be used by limited companies or partnerships involving a limited company.

Flat rates can be used for certain vehicle costs, working from home and living at business premises. Other expenses must generally be calculated using the actual costs.

For vehicles, the 2026–27 rate for cars and goods vehicles is 55p per business mile for the first 10,000 miles, falling to 25p per mile thereafter. Motorcycles qualify for 24p per mile.

For working from home, the monthly flat rate is £10 for 25 to 50 hours, £18 for 51 to 100 hours and £26 for 101 hours or more.

Businesses operating from premises that are also the owner's home can also use flat rates to account for private use, depending on the number of people living there.

Records of business mileage, home-working hours and people living at business premises should still be kept. Using HMRC's simplified expenses checker can also help compare the flat-rate method with claiming actual costs before making a decision.

Employers must make sure their staff receive at least the National Minimum Wage or National Living Wage rate that applies to them. The correct rate depends on the worker's age and, in some cases, whether they are an apprentice.

Since 1 April 2026, workers aged 21 and over are entitled to the National Living Wage of £12.71 an hour. The rate for workers aged 18 to 20 is £10.85, while workers under 18 are entitled to minimum of £8 an hour. 

Apprentices also have a minimum rate of £8 an hour, but this does not apply throughout their apprenticeship. An apprentice is entitled to the apprentice rate if they are under 19, or if they are 19 or over and in the first year of their apprenticeship.

Once an apprentice aged 19 or over has completed the first year of their apprenticeship, they become entitled to the minimum wage rate for their age. For example, a 21-year-old apprentice in their first year is entitled to £8 an hour, but after completing that first year they must receive at least £12.71 an hour.

Employers who fail to pay the minimum wage can face significant financial penalties. HMRC can require arrears to be repaid and impose penalties of up to 200% of the underpayment, subject to the applicable rules. Serious cases can also result in criminal prosecution.

Employers should therefore review rates regularly, particularly when employees have a birthday or apprentices reach the end of their first year.

The minimum wage rates change every 1 April, so payroll systems should be updated promptly to avoid underpayments.

A company does not have to be formally closed to become dormant for Corporation Tax. A company is usually considered dormant if it has stopped trading and has no other income, such as investment income.

A new limited company that has not yet started trading can also be dormant for Corporation Tax. Other examples include certain flat management companies and unincorporated associations or clubs owing less than £100 in Corporation Tax.

It is important to understand what counts as trading. For this purpose, activities can include buying or selling, renting property, advertising, employing someone or receiving interest. A company therefore needs to consider its activities carefully before assuming that it is dormant.

If a company has stopped trading and has no other income, it can tell HMRC that it is dormant for Corporation Tax. If HMRC has already issued a notice to deliver a Company Tax Return, the company must still file a return showing that it is dormant for the relevant period.

Once HMRC has been told that a limited company is dormant, it generally does not have to pay Corporation Tax or file further Company Tax Returns unless HMRC issues another notice.

Being dormant for Corporation Tax does not remove the company's Companies House obligations. A limited company must still file its annual accounts and confirmation statement.

If the company is VAT registered and does not intend to trade again, it must deregister for VAT within 30 days of becoming dormant. If it plans to restart trading, it must continue submitting nil VAT returns.

Dormant status should therefore be reviewed carefully, particularly when a company stops trading but continues to have financial activity.

Making a trading loss whilst not ideal can sometimes generate a tax refund. If you are a self-employed individual or a member of a trading partnerships, a trading loss can potentially be set against other income or capital gains. This can reduce the amount of tax payable and, where tax has already been paid, may result in a refund.

For the 2025-26 tax year that ended in April, a loss can generally be set against income for the same year or the previous tax year. This means a business that made a profit in an earlier year but has subsequently made a loss may be able to recover some of the tax previously paid.

There are restrictions. For example, the trade must generally be carried on commercially and for profit, rather than as a hobby. Other restrictions can apply depending on the circumstances, including where the individual works fewer than 10 hours a week on the commercial activities of the trade.

There is also a limit on the amount of certain Income Tax reliefs that can be claimed against total income. The limit is generally the higher of £50,000 or 25% of adjusted total income.

A loss can also usually be carried forward and used against future profits from the same trade.

If you have a trading loss, it may provide an opportunity to reduce an earlier tax bill, generate a refund or reduce tax on future profits. The rules can be complex, and we are happy to help advice you on the best way forward. 

The rate of Corporation Tax payable depends mainly on the level of a company’s taxable profits. The main rate is 25% and applies where profits exceed £250,000. Companies with profits of £50,000 or less generally pay Corporation Tax at the small profits rate of 19%. But note, these two thresholds will reduce if a company has associated companies.

The position is more complicated for companies with profits between these two thresholds. Where profits are between £50,000 and £250,000, Corporation Tax is charged at the 25% main rate, but marginal relief reduces the overall amount of tax payable. Accordingly, the effective rate increases gradually as profits rise, rather than jumping immediately from 19% to 25%.

This means that a company whose profits are just above £50,000 will not suddenly pay 25% Corporation Tax on all its profits but if there are profits are close to £250,000 they will pay tax at almost the 25% rate. In this way, the marginal relief results in a smoother transition between the two rates. 

Corporation Tax is initially calculated at the main rate of 25%, with marginal relief then deducted to arrive at the final liability. The relief is calculated using a standard fraction of 3/200.

Companies should check which rate applies when preparing their Corporation Tax calculation, particularly where profits are close to either threshold.

The thresholds can be affected by the number of associated companies, so a company should not assume that its profit figure alone determines the applicable rate. It is important to ensure that the correct amount of Corporation Tax is paid.