Beam Accountancy

Cybercrime is no longer a problem that only affects large organisations. Increasingly, small and medium-sized businesses are becoming targets because criminals often see them as having weaker security and fewer resources to recover from an attack.

A successful cyberattack can have serious consequences. Customer information may be stolen, computer systems locked by ransomware, payments diverted or operations brought to a standstill. Even a short period of disruption can damage cash flow, customer confidence and a business's reputation.

Many attacks begin with something as simple as a convincing phishing email. An employee clicks on a malicious link or opens an infected attachment, allowing criminals to gain access to the business's systems. Artificial intelligence has made these fraudulent emails more convincing than ever, making staff awareness increasingly important.

Fortunately, there are several straightforward steps that every business can take to reduce the risk. Strong, unique passwords should be used for all accounts and protected by multi-factor authentication wherever possible. Software should be updated promptly to close known security vulnerabilities, and important business data should be backed up using secure, offline or cloud-based systems.

Staff training is equally important. Employees should understand how to recognise suspicious emails, unexpected payment requests and fraudulent telephone calls. Creating a culture where staff feel comfortable questioning unusual requests can prevent costly mistakes.

Business owners should also consider whether their cyber security arrangements have kept pace with the way they now work. Remote working, cloud software and mobile devices have all increased the number of ways that criminals may attempt to gain access.

Cyber security is not simply an IT issue. It is a business risk that should be reviewed regularly, just like insurance or health and safety procedures.

Taking sensible precautions today could prevent significant financial losses tomorrow. A modest investment in cyber security can protect your business, reassure your customers and help ensure that an isolated incident does not become a major crisis.

A recent ruling has determined that targeting individuals online, even on a private group chat, can lead to a loss of employment. A Mr. Y was employed by the Royal Mail as a delivery driver with an impeccable, longstanding record of service. This was not to last as, in 2022, a labour dispute orchestrated by his union led to the creation of a messaging group for all union members at his depot.

While Mr. Y held no formal office or role within his union, he remained an active member and his strength of feeling led him to post two highly controversial messages on the group chat. The first was a direct expletive aimed at their employer, albeit one accompanied by an ‘only joking’ emoji. The second, however, constituted a significant escalation, as Mr. Y called out two colleagues who had opted not to participate in the strike, demanding their allegiance and jesting that the failure to join their ranks would result in their ‘cars being blown up’.

Mr. Y subsequently apologised and maintained that he had been joking. However, a trainee manager who had been sent the post considered it genuinely intimidating. This led to a formal internal investigation by the Royal Mail, which found that the posts directly breached their code of corporate conduct and social media policies regarding threatening behaviour toward colleagues, leading to Mr. Y's immediate dismissal for gross misconduct. In response, Mr. Y launched a legal claim, arguing that his dismissal was automatically unfair, as his messages fell within the auspices of protected trade union activities.

The Employment Tribunal rejected his claim, reaffirming the company’s finding of misconduct. Mr. Y then took his case to an Employment Appeal Tribunal. The Appeals Judge, however, upheld the Lower Tribunal’s finding that legal protections for union activities do not extend to abusive or threatening language merely because it takes place within a union-branded forum. The Judge concurred that such profanity did not advance any union aims and that any message intimating violence transcended peaceful and lawful industrial encouragement. Moreover, the Tribunal did not need to decide whether the message was intended as a genuine threat or as a joke, as both would engender an atmosphere of menace that breached any statutory protection.

This ruling sends an unambiguous warning that messaging platforms, including ‘private’ group chats, are not legally insulated spaces. This case draws a clear demarcation between any vigorous advocacy for lawful union action and targeting colleagues with hostile rhetoric. Any attempts to ‘pressure’ coworkers with threats of violence, no matter how they are intimated, carry severe professional risk. For employers, this may signal that their purview extends to any private group chats among their employees, should their attention be drawn to any problematic messages, and not merely internal Emails or messaging forums such as Slack and Teams.

Companies and other organisations that are liable for Corporation Tax must ensure they register with HMRC at the correct time. Failing to register when required could result in missed filing obligations and potential penalties.

Most limited companies can register for Corporation Tax when they are first incorporated at Companies House. If Corporation Tax was not set up during incorporation, the company will need to add Corporation Tax services in its business tax account.

A company usually needs to register for Corporation Tax when it becomes active for Corporation Tax purposes. This can include starting a trade or professional activity, providing services, buying and selling goods for profit, earning interest, managing investments or receiving any other income.

Companies that are within the charge to Corporation Tax must tell HMRC within three months of the start of their Corporation Tax accounting period that they are active.

It is important to remember that a newly incorporated company may not immediately have Corporation Tax obligations if it is dormant. A dormant company does not generally pay Corporation Tax, although it must still meet any Companies House filing requirements.

Businesses seeking investment through the Seed Enterprise Investment Scheme (SEIS) or Enterprise Investment Scheme (EIS) can benefit from obtaining advance assurance from HMRC before approaching investors.

Advance assurance allows a company to ask HMRC whether a proposed investment is likely to meet the conditions of a venture capital scheme. While it is not a guarantee that an investment will qualify, receiving assurance can provide potential investors with greater confidence that the company’s proposal is likely to be eligible.

To apply, a company must provide HMRC with details of the proposed investment, including its business plan, financial forecasts, latest accounts (if available), details of trading activities and how the funds will be used to support growth and development.

HMRC will also consider whether the company meets the relevant conditions, including the risk-to-capital requirement. Applicants may need to provide details of prospective investors or evidence of arrangements with fund managers, crowdfunding platforms or business promoters.

If advance assurance is granted, HMRC will issue a statement that the investment is likely to qualify. The company can provide this to potential investors as part of its fundraising process. However, the assurance only applies based on the information provided in the application, and any significant changes can affect its validity.

Employers providing loans to employees or directors need to ensure they correctly calculate any taxable benefit using HMRC’s official rate of interest. Where a loan is provided at no interest or at a rate below the official rate, a taxable benefit may arise. These types of loans are referred to as beneficial loans.

A beneficial loan therefore occurs when the interest paid by the employee or director is less than the interest that would have been payable using HMRC’s official rate of interest. The taxable benefit is generally calculated on the difference between the interest due at the official rate and the amount of interest actually paid.

The official rate of interest is set by HMRC and is used to calculate the taxable benefit for each tax year. Employers must use the correct rate when reporting benefits through payroll or on form P11D. The rate may change over time, so employers should check the applicable rate for the relevant tax year. For the 2026-27 tax year, HMRC’s official rate of interest is 3.75%. Employers should use the correct rate for the relevant tax year when calculating the taxable benefit on beneficial loans.

For example, if an employee receives an interest-free loan, the employer must calculate the interest that would have been charged using the official rate and report this amount as a taxable benefit, unless an exemption applies.

Certain loans may be exempt from the beneficial loan rules, including some small loans where the total outstanding balance does not exceed £10,000 throughout the tax year.

Employers should review any loans provided to employees or directors regularly to ensure the correct calculations are made and benefits are reported accurately.

When a sole trader or the partners in a partnership transfer a business to a limited company, Capital Gains Tax (CGT) may arise. This is because business assets are normally treated as being transferred at their market value, which may be considerably more than their original cost.

However, Incorporation Relief can allow some or all of the resulting gain to be deferred.

Broadly, the relief may be available where a business is transferred to a company as a going concern, together with all its assets, other than cash if desired, and the consideration received is wholly or partly in shares in the company.

Where the conditions are met, the gain eligible for relief is deducted from the CGT base cost of the shares received. This means that CGT is generally postponed until the shares are eventually sold or otherwise disposed of. If cash or other consideration is received alongside shares, the relief is normally restricted to the proportion of the transfer represented by shares. Part of the gain may therefore become immediately chargeable to CGT.

Incorporation Relief must now be claimed

An important change applies to businesses transferred to companies on or after 6 April 2026. Previously, Incorporation Relief applied automatically where the necessary conditions were satisfied. For transfers from 6 April 2026, the relief must instead be claimed. The claim will normally be made through the Self-Assessment tax return for the tax year in which the transfer takes place.

The claim must be made on or before the first anniversary of 31 January following the tax year in which the business transfer took place. For example, for a transfer during the 2026/27 tax year, the claim deadline will normally be 31 January 2029.

Failing to make a valid claim could therefore result in CGT becoming payable on gains arising when the business is transferred to the company.

Incorporation Relief is not necessarily the best option in every case. Before incorporating a business, it is worth considering the immediate CGT consequences, whether other reliefs may be available and the potential tax position when the company shares are eventually sold.

Professional advice should therefore be obtained before completing a business incorporation, particularly where the business has significant goodwill, property or other assets that have increased substantially in value.

If you become liable to pay a tax or register for a tax that HMRC has not already been informed about, you must notify HMRC within the relevant time limit. Failing to do so can result in a financial penalty in addition to the tax and any interest due.

A failure to notify can arise in a range of situations, including when a business exceeds the VAT registration threshold, a company becomes liable for Corporation Tax or an individual first becomes liable to Income Tax when self-employment profits or investment income first arises. In some cases, businesses must also register before carrying out certain taxable activities.

HMRC calculates penalties according to the circumstances of the failure. Factors to be considered include whether the failure was deliberate, whether it was disclosed voluntarily before HMRC identified it, and how much assistance was provided during the disclosure process. Taxpayers who make an unprompted disclosure and fully cooperate with HMRC can often receive significantly lower penalties than those who wait for HMRC to discover the issue.

The level of penalty depends on the type of failure and the taxpayer’s behaviour. Penalties can range from a percentage of the tax liability that should have been reported, with lower penalties generally applying where a taxpayer makes a voluntary disclosure and cooperates with HMRC. Higher penalties can apply where the failure was deliberate or where HMRC discovers the issue before the taxpayer comes forward. In the most serious cases, penalties can be up to 100% of the tax due. HMRC will not normally charge a penalty where there is a reasonable excuse, provided the taxpayer notified HMRC without unreasonable delay after the reasonable excuse ended.

If you think you may have failed to notify HMRC of a tax liability, it is usually better to act promptly, and we would be happy to advise you. Coming forward voluntarily and providing complete information can reduce the level of any penalty and help resolve matters more quickly. 

Receiving tax relief on pension contributions into a workplace pension is a great way to help prepare for retirement. In addition, contributions from your employer can make the pension savings even greater. 

If you are automatically enrolled into a workplace pension a percentage of your earnings is paid into your pension fund each payday. Your employer must also contribute if you meet the automatic enrolment rules, with minimum contributions currently set at 3% from the employer and 5% from the employee, giving a total minimum contribution of 8% of qualifying earnings. Some employers also choose to contribute more than the legal minimum.

The way you receive tax relief depends on how your workplace pension operates. Under a net pay arrangement, pension contributions are deducted before Income Tax is calculated, meaning you receive tax relief automatically at your highest rate.

Under relief at source, contributions are taken after tax, and your pension provider claims basic-rate tax relief from HMRC. Higher and additional-rate taxpayers may then be able to claim extra tax relief through their self-assessment tax return or by contacting HMRC.

Some employers also offer salary sacrifice, where you agree to exchange part of your salary for an employer pension contribution. This can reduce both Income Tax and National Insurance contributions for you and your employer.

Before opting out of a workplace pension, it is worth considering the value of employer contributions and tax relief, with some care as these benefits can significantly increase your retirement savings over time.

Economic uncertainty has affected the confidence of many small business owners. Rising costs, changing customer demand and pressure on cash flow have led some businesses to postpone investment until conditions improve. While this cautious approach is understandable, waiting for the economy to recover before taking action can mean missed opportunities.

A good starting point is to review profitability. Are all products and services making a worthwhile contribution? Have prices kept pace with increasing costs? Small adjustments to pricing or the product mix can have a significant impact on profits without requiring additional sales.

Cash flow also deserves regular attention. Reducing debtor days, managing stock more effectively and reviewing supplier payment terms can improve liquidity and reduce the need for external finance. Strong cash flow provides greater flexibility when opportunities arise.

Periods of slower growth are also an ideal time to review business processes. Many firms discover that routine tasks can be simplified or automated, freeing staff to focus on activities that generate income or improve customer service.

Customer relationships should not be overlooked. Existing customers are often the easiest source of additional business. Regular communication, prompt service and identifying changing customer needs can strengthen loyalty and create opportunities to introduce new products or services.

Investment in staff training is another area that often delivers long-term benefits. Developing new skills today can improve productivity and prepare employees for future challenges.

Finally, ensure that the business has realistic budgets and cash flow forecasts. Regularly comparing actual results against expectations allows problems to be identified early and gives owners greater confidence when making important decisions.

The businesses that emerge strongest from challenging economic conditions are rarely those that simply wait for circumstances to change. They are the ones that prepare, adapt and position themselves for success long before confidence returns.

Technology is changing the way businesses operate, and the pace of change is only increasing. While large organisations often have dedicated IT departments, many small businesses still rely on traditional methods that consume valuable time and limit productivity. Improving digital skills can help businesses work more efficiently, reduce costs and provide a better service to customers.

Digital skills are no longer limited to understanding computers. They include making effective use of cloud accounting software, collaborating online, managing customer relationships, using artificial intelligence responsibly, improving cyber security and automating routine administration.

One of the biggest benefits is the time that can be saved. Tasks such as issuing invoices, chasing payments, booking appointments and filing documents can often be automated, allowing owners and staff to concentrate on higher value work. Even small improvements can save several hours each week.

Better digital skills can also improve decision making. Most business software can provide real-time information on sales, cash flow and profitability, allowing problems to be identified before they become serious. Owners who have access to timely financial information are generally better placed to make informed decisions about pricing, investment and recruitment.

Customer service can also benefit. Businesses that use online booking systems, electronic quotations and digital communication often respond more quickly to enquiries and provide a smoother experience for their customers. This can improve customer satisfaction and encourage repeat business.

However, technology should be adopted carefully. Staff need appropriate training, and businesses should ensure that confidential information is protected. Strong passwords, multi-factor authentication and regular software updates remain essential safeguards against cybercrime.

Many organisations now offer free or subsidised digital skills training for small businesses. Taking advantage of these opportunities can be a cost-effective way to improve productivity without significant investment.

Businesses that embrace technology are often better equipped to respond to changing market conditions. Improving digital skills is not simply about keeping up with new technology. It is about working smarter, making better decisions and creating more time to focus on growing the business.