Month: March 2023

Next week, 15 March, the Chancellor will deliver his first Spring Budget. It will provide an opportunity to cushion companies from the effects of the Corporation Tax (CT) increase to 25% and the withdrawal of the 130% Super-Deduction; both timed for the 1 April 2023.

Although any large-scale tax cuts may be off the table, the Chancellor may still be willing to provide companies with incentives to invest.

The Super-Deduction was introduced to encourage companies to invest in qualifying equipment before the 1 April 2023 increase in CT rates to 25%.

So, what incentives could we expect?

• The Chancellor could extend the 130% relief, thus offering corporate businesses an effective 32.5% tax relief (25% x 1.3). This would be a useful fiscal carrot to encourage capital investment from April 2023.
• He could extend the relief to cover rented, leased or second-hand goods.
• He could extend the relief to include non-corporate business owners and the self-employed.

Alternatively, he could simply increase the permanent Annual Investment Allowance above the present £1m.

The business community needs incentives to invest. Otherwise, there is a danger that firms may simply defer investment, waiting for better times, which, of course, would further reduce our competitive ability to match productivity advances by countries who are less concerned with this “wait and see” approach.

The ultimate financial objective of most trading companies is to convert their supply of goods and services into cash – deposits in their bank account.

However, when goods are sold on credit, and you give customers time to pay, there is a delay in the cash conversion process, and for a period of time your cash proceeds of sale stay in your customers bank account.

Credit control is the management of this process to ensure customers pay in accordance with your credit terms (30 days for example). Without effective credit control there would likely be a further delay, beyond your agreed credit terms, and the cumulative effect of these delays could cause you serious cash flow problems.

An effective way to manage credit control is to automate the issue of statements and follow up letters using your bookkeeping software. It should be possible to manage the process by setting up delivery of reminders to pay by email.

Please let us know if we can help with the set-up process.

Finally, manage the process. As well as meeting your sales and profits targets each month, be sure to include a review of your current days credit being taken by customers. If the days credit taken is higher than the days credit you have set, then action may be required to intervene and chase payment by more direct means.