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6 Creative Finance Tips to Boost Your Business

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Whatever your business, broadly speaking, your major goal is to increase your income and reduce your expenditure, right? 

Common strategies include increasing prices, losing staff, expanding your product range, working longer hours, switching to cheaper source materials, or simplifying your service, but none are particularly appealing.

Ideally, you want to maximise your profits without reducing the quality of your service or product – or impacting quality of life for you or your staff. Some might say that it’s not possible, but with some creativity and the right guidance, it can be done.

For Creativity Day, we have curated some slightly less obvious, creative tactics that you can adopt that could boost your income, reduce expenditure, or both.  

1. Switch to LED Lighting

Replacing inefficient lighting on your premises with LEDs could reduce your energy usage at least than 50%, simultaneously saving your business money and reducing your carbon footprint.

  • LED lighting is significantly more energy-efficient than many traditional lighting systems as it produces more ‘useful lumens’, i.e., less of the energy consumed by the light is wasted through heat dissipation. This makes LED lighting at least 50% cheaper to power, depending on the type of lighting being replaced.
  • Because LED lighting uses electricity more efficiently, your business’ energy consumption and therefore your impact on the planet should reduce by at least 50%. 
  • After 25,000 hours traditional lighting will be operating at less than 80% of its potential output. An LED lightbulb lasts, on average, for 50,000 hours and, if used efficiently, for as long as 100,000 hours.
  • In addition, LED lights do not include mercury like fluorescent and mercury vapor lights, so they do not require the same maintenance or management at the end of their life.

2. Research & Development (R&D) Tax Relief

Many SMEs do not realise that they can apply for R&D tax relief and as a result a large chunk of the funds go unclaimed every year. In fact, the average R&D claim for SMEs in 2022 was £56,000 – can you afford to let that kind of money get away?

Technology and science move on rapidly, and for companies to stay competitive, they have to keep up. R&D tax credits are a government tax incentive intended to encourage and reward companies that invest time and resources in research and development that could benefit the whole UK economy. The scheme reduces the amount of corporation tax that a company pays (or acts as a cash payment when companies are making a loss.

You might assume that only your activities would not qualify as research and development, or that only companies working in laboratories or engineering workshops can apply.

In reality, any business that pays corporation tax can apply for R&D tax relief, as long as the research and development they are engaged in is original, unique, and has the potential be a ‘game-changer’ for their industry (not just their company).

Click here for the latest information on the government website.

3. Switch to electric vehicles

Does your business have a fleet of vehicles and/or provide company cars for staff? Do those vehicles run on petrol? Are you interested in reducing your taxes and saving money on running costs? Would you like to do your bit in the fight against climate change?

If the answers to those questions are yes, yes, yes, yes, and that would be nice, switching to electric vehicles could be the best decision you make this year.

In addition to the environmental benefits and the importance of futureproofing your business against future legislation on the use of petrol/oil vehicles, electric vehicles bring several financial benefits. 

  • Electric vehicles are cheaper to run. Fuel is typically the second biggest vehicle-related cost for businesses and can account for as much as 25%-30% of fleet expenditure. According to Nimblefins.co.uk, on a per mile basis, the fuel costs in the range of 14p – 19p pence per mile for a petrol car and around 15p – 19p pence per mile for a diesel car. This is roughly 40% to 90% more expensive than the cost to run an electric car per mile, depending on the cost of electricity. 
  • Fully electric vehicles are exempt from first year road tax and can unlock other tax benefits including a Benefit in Kind tax of 2% in 2022-23. Vehicles with emissions of less than 50g/km are also eligible for 100% first year capital allowances. 
  • Electric vehicles are cheaper to maintain as the engines have fewer moving components. 
  • Electric vehicles are exempt from congestion charges.

4. Invest in employee wellbeing

“Poor mental health costs UK employers up to £45 billion each year. But for every £1 spent by employers on mental health interventions, they get back £5 in reduced absence, presenteeism, and staff turnover.” 

Deloitte, 2020

At least 1 in 6 workers experience mental health problems like anxiety and depression. Research by mental health charity, Mind, shows that work is the biggest cause of stress in people’s lives – more so than money problems.

Employees are simultaneously the frontline and the driving force behind your organisation, and their mental health and emotional wellbeing should be as important to you as their physical health. Not only that, 12.7% of all sickness absence days in the UK can be attributed to mental health conditions (according to the Mental Health Foundation).

Investing in the mental health and wellbeing of your staff can help your business to retain experienced and skilled staff, reducing the need for recruitment and training expenses, prevent absenteeism and create a more engaged, loyal, and motivated team, improving productivity and efficiency. 

5. Utilise Invoice Finance

Instead of having to wait weeks or months for customers to pay their invoices, an invoice finance facility enables businesses to treat their unpaid invoices as assets and access up to 90% of their value straight away.

Once set up, an invoice finance facility provides businesses with a healthy cashflow that can be used to cover the costs involved in setting up, ongoing operational costs, investments, and growth.

How does invoice finance work?

  • You would carry out your services or deliver your goods as usual.
  • In addition to sending your invoice to customer, you would also send it to your invoice finance provider.
  • The invoice finance provider will advance you up to 90% of the value of the invoice, typically just a few hours after receiving it.
  • When your customer has paid their invoice, you will receive the remaining balance of the invoice, minus a pre-agreed fee for the provider’s service.

6. Install Solar Panels

The main motivation behind solar panel installation is to reduce the electricity costs of the company, but while that’s a compelling enough reason on its own, it’s not the only advantage. Businesses are being scrutinised more and more for their impact on the environment – their ‘green credentials’ matter more than ever.

Also, generating free electricity not only reduces electricity costs in the present but will also protect businesses from future fluctuations in energy prices. 

The cost of installing solar panels varies from project to project, but when paid for via a finance arrangement, businesses avoid parting with a large chunk of capital upfront. The cost of the solar panels is then repaid over the term of the finance agreement via fixed, regular payments. 

What’s more, many businesses see a very high return on their investment each year, as the savings they make on their reduced electricity costs often more than cover the finance payment, so cashflow can remain positive all the way through.

Next steps

If any of the above is of interest and you would like to discuss how commercial finance could boost your business, get in touch today for a no-obligation conversation. We’re always happy to answer your questions and make recommendations that we believe will help your business to reach the next level. 

Bluestone Backs New Charity: OnSide

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We are pleased to announce that we are supporting a new charity, Onside.

What does OnSide do?

OnSide is a national youth charity determined to make sure that all young people have the opportunity to discover their passion and their purpose. The organisation builds, launches, and supports a network of state-of-the-art multi-million-pound youth centres (Youth Zones) in the UK’s most disadvantaged areas.

OnSide is a unique partnership between young people and their community, local authorities, and supporters from the private sector (including businesses and philanthropists) who help to fund and build each Youth Zone. 

Since 2008, OnSide has raised millions of pounds in funding and built local and national partnerships. You can read some of their success stories here. 

How to help?

Support live projects

OnSide is currently fundraising for new Youth Zones in Barnsley, Bristol, Grimsby, Preston, Thurrock, Warrington, and West London (Hammersmith & Fulham). 

Each Youth Zone starts with a circa £9m capital campaign run by OnSide, creating a new local independent charity which then becomes part of the Network. The capital build is half funded by local authority investment and half by philanthropy.

For each project they also seek to secure the first three years of a Youth Zone’s annual revenue and expenditure. 

You can find out more about how you can support current fundraising opportunities for new Youth Zones here. 

Grow the network

In the next five years, OnSide plan to continuing growing by opening four new Youth Zones each year and significantly increasing the number of young people accessing their support whilst growing their membership to over 100,000 young people. 

They are looking for partners who share their vision and are interested in making a transformation to how young people are supported in society.

Further information about how you can help them grow their network can be found here. 

Support innovative network wide projects

Over the last five years, young people, staff and volunteers across Youth Zones have collaborated to enhance mental health and wellbeing, mentoring, digital skills, financial literacy, careers and enterprise, sport and activity, Youth Voice, and citizenship. 

Youth Participation and Inclusion gives young people a greater voice in the matters important to them, both within their Youth Zone and in society. 

OnSide are currently looking for support with training and development, commit to fit and employability – you can find out more about each of these projects here. 

Charities we regularly support

Throughout 2022, Bluestone has donated around £10,000 across multiple charities, totalling around £45,000 over the past five years. Some of the charities we regularly support are:

  • The Children’s Hospital Charity 
  • Wakefield Hospice 
  • MS Society 
  • Mind 
  • Normanton Food Bank 
  • NEW: OnSide

Other charities we’re proud to have supported: 

  • Great Ormand Street 
  • Guide Dogs UK 
  • Children in Need 
  • Macmillan Coffee Morning 
  • Oxford’s Children’s Hospital 
  • Just Giving 
  • FSL 
  • Brave the Shave 
  • Martins House Hospice for Children and Young People 
  • Alzheimer’s Society 

Self-Assessment Loans for your Business: January Deadline Approaching

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With the 31st January 2023 self-assessment deadline approaching, we have revisited our blog on the key benefits and features of a self-assessment loan and how this can support your business.

In January and July each year, the Self Assessment fee can be a significant outgoing for sole traders and partnerships. This often has a negative impact on cashflow for many businesses, inhibiting their operation and delaying their growth.

What many do not realise, however, is that this doesn’t have to be the case.

With a Self Assessment loan, you could spread the cost of your tax bill over time enabling you to retain capital in your business while making manageable monthly repayments in line with your budget. Read on to discover more about Self Assessment loans.  

What is Self Assessment?

Self Assessment is the process by which you advise HM Revenue & Customs (HMRC) of your income, gains and relevant expenses for a tax year. You currently do this by completing a tax return, sending it to HMRC and calculating your own tax liability (the online return will do the calculation for you automatically).

You must send a tax return if, in the last tax year (6 April to 5 April), you were:

  • self-employed as a ‘sole trader’ and earned more than £1,000 (before taking off anything you can claim tax relief on).
  • a partner in a business partnership.

The government’s online system will calculate how much tax you owe based on your earnings, and this amount needs to be paid by a specific deadline to avoid additional penalties.

What are the payment dates for tax returns?

A UK tax year runs from 6th April to the following 5th April. For example, if we are talking about the tax year 2022/2023, it started on 6th April 2022 and will finish on 5th April 2023. Generally, the payments need to be made in January and July each year.

  • 31st January (during the tax year): The first payment on account for the tax year ending the following 5 April is due, e.g., the first payment on account for the 2022/23 tax year is due by 31st January 2023.
  • 31st July: The second payment on account for the tax year ending the previous 5 April is due, e.g., the second payment on account for the 2022/23 tax year is due by 31 July 2023.

NOTE: Depending on your circumstances, there may be other relevant dates and deadlines during the year to be aware of. Visit the government website for more information.

What is a Self Assessment loan?

A Self Assessment loan provides the cash you need to pay your fee by the relevant deadline. You then make repayments on the loan over 6, 10, or 12 months so you can align the repayments with income and manage finances more effectively. The capital retained can be used to operate and/or invest in the business. 

Income and other outgoings are normally budgeted monthly so spreading the cost of self-assessment can help cashflow, align the outgoing with income and enable you to manage finances more effectively. The capital that you retain can be used to grow the business.

For LLP members or Partners who are taxed individually on their share of the firm’s profits, a self-assessment loan can be taken out by the firm to spread the cost, aligning it with other business outgoings and income.

How do Self Assessment loans work?

  1. Your partners complete their self-assessment and you collate the combined amount due to HMRC.
  2. You can then submit that amount to us and we will source the most competitive finance option for you to allow you to spread the cost.
  3. We’ll secure an agreement to finance from one of our specialist funders who will pay HMRC direct. 
  4. The payments will then be made by the firm to the funder over time to settle the balance. 
  5. The capital retained within the business can then be utilised for other means to help grow the business.
  6. The funder will need an HMRC statement confirming all outstanding tax liabilities at least 7 days prior to the due date to ensure payments are made to HMRC on time.

In some cases, even if you have already made the payment to HMRC, we may be able to secure finance for you retrospectively if you contact us within 14 days of making the payment.

A financial illustration

Based on a £50k Self Assessment Loan (this is for illustrative purposes only, as individual circumstances differ).

  • 12 monthly repayments of £4,492.20pcm = Total repayable: £53,906.40
  • 6 monthly repayments of £8,760.43pcm = Total repayable: £52,562.58

Interested in a Self Assessment loan for your business?

If you are interested in spreading the cost of your next self-assessment tax bill over time to retain capital and enable you to manage your budget more effectively, get in touch with us today.

We will assess your business’ individual circumstances and work with you to decide if a Self Assessment loan or another finance solution would be the right choice.

Complete the form below to send us an enquiry.

What is a VAT Loan? Key Features and Benefits

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Paying VAT bills every quarter is a legal obligation, but it can be a financial obstacle for many businesses, especially in the current financial climate. Cashflow issues are a common side effect of each quarterly payment. However, what many do not realise, is that it doesn’t have to be like that. 

Many business owners are taking the sting out of paying VAT bills by taking out a VAT loan to ensure HMRC are paid in full and on time and then repaying the loan in instalments over time. This can help businesses to retain valuable cash, avoid late payment penalties, and establish a healthier cashflow. 

Read on to discover more about VAT loans.  

What is VAT?

VAT stands for Value Added Tax. 

It is added to the price of a product or service at every stage of production, distribution, or sale to the end consumer. If the end consumer is a business that collects and pays VAT to the government on its products or services, it can reclaim the tax paid. If the end consumer is not a business or is not registered for VAT, they cannot reclaim the tax paid.

Many products and services in the UK are liable for VAT – that is, they are not VAT exempt. Goods and services that are not exempt typically accrue VAT at the following rates:

  • Standard rate: 20% (most goods and services).
  • Reduced rate: 5% (some goods and services, such as home energy and children’s car seats).
  • Exempt rate: 0% (includes basic and essential items such as most food and children’s clothes).

VAT registered businesses collect VAT on behalf of HMRC and must pay the collected tax (minus any reclaimed tax), to the government on a regular basis – usually quarterly. Most VAT must be paid one month and seven days after the reporting period, but some types of business will have different payment requirements. 

Businesses must register to pay VAT if: 

  • They expect their VAT taxable turnover to be more than £85,000 in the next 30-day period.
  • They had a VAT taxable turnover of more than £85,000 over the last 12 months.
  • The taxable turnover is on sales of goods and services that would be liable to VAT.

Every VAT registered business receives a unique VAT number which must be shown on invoices and most receipts.

It is important to paying VAT bills on time to significant penalties and surcharges. If a business is struggling to pay their VAT bill, they might consider avoiding late payment penalties and keeping cash in the bank by taking out a VAT loan.

What is a VAT loan?

A VAT loan is a type of commercial loan used to pay the quarterly VAT payment to HMRC. 

If a business is struggling with cashflow when their VAT is due to be paid or they would rather invest their cash into the business (e.g., to buy new assets), they might apply for a VAT loan. The lender pays HMRC the amount owed in full, and the business pays the lender back in instalments over time. Repayments are subject to fixed interest rates (which will vary depending on the business’ circumstances )and typically made on a monthly basis over 3, 6, 9 or 12 months. 

The amount a business can borrow will depend on the unique circumstances of the business and eligibility. In addition to credit checks and a review of the business’s financial situation, other eligibility criteria will usually apply, often including:

  • the business is VAT registered
  • turnover is more than £85,000 ex-VAT
  • UK business
  • usually a limited company, although partnerships and some sole traders may also qualify
  • trading for more than one year.

Why would a business use a loan to pay VAT?

  • A VAT loan ensures that HMRC receive their payment in full and on time, helping your business to avoid late payment penalties. 
  • A VAT loan can prevent you from parting with a large chunk of cash that could be put to better use in your business, i.e., to be invested in growth. 
  • VAT loan repayments can be made on a monthly basis rather than making quarterly VAT payments which can help to maintain a healthy cashflow. 
  • VAT loans do not use existing banking or credit facilities and may be arranged as ‘rolling’ or drawdown borrowing (subject to eligibility). This allows the borrower to use loan funds on a fluctuating basis.

Disadvantages of VAT loans

  • Interest will be applied to a VAT loan, so while the payments will be spread over a longer period of time businesses will pay more overall. 
  • VAT loans cannot be used to pay other tax liabilities such as corporation tax, although it is possible to obtain a loan to cover corporation tax bills. 

Interested in a VAT loan for your business?

We can help businesses like yours to obtain the best funding options and facilities, quickly and efficiently, whilst ensuring their short-term goals and long-term ambitions are considered in their financial strategy. 

If you are interested in spreading the cost of your VAT bill over time to retain capital and enable you to manage your budget more effectively, get in touch with us today.

We will assess your business’ individual circumstances and work with you to decide if a VAT loan or another finance solution would be the right choice.

Complete the form below to send us an enquiry.

Introducing Bluestone: Toni McLeod

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Regional Account Manager, North East of England and Scotland 

‘I really enjoy the variety of my job – getting to meet businesses from a variety of different industries and seeing what the right finance solution can help them achieve. I look forward to developing relationships with the organisations in my region, helping them to boost their growth strategy through tailored finance solutions.’

Toni joined the Bluestone Leasing team in 2022 with 8 years of experience in the commercial leasing sector industry behind her. Covering the North East of England and Scotland, Toni helps businesses in her region, in any sector, to grow either by financing their own assets or enabling them to offer finance to their customers. 

Although a comparatively recent addition to the team, Toni has settled in quickly with her positive approach, hardworking attitude and plenty of experience in commercial finance.

The early days

Toni was born in Fife in Scotland, but when she was 7 years old her family moved to Cramlington in the north east of England which is where she has been based ever since. 

‘I was one of five children and spent a lot of my time irritating my siblings, but I also played a lot of sports including athletics, running, and I played on the school netball team. This taught me a lot about teamwork. The person I most admire is my mum – she raised five children and I have no idea how she did it! She always taught me to treat others how I would want to be treated.’

The world of work   

Toni remembers an early ambition of wanting to be a bin collector – ‘It probably had something to do with wanting to help keep things clean and tidy’ – but her first paid job was washing dishes in a local pub at the age of 13. Over time she moved on to waitressing before eventually working behind the bar when she was old enough and then leaving home for university.

‘While at university in Leeds I worked in customer service for Asda, and then after I graduated I went travelling round south east Asia. In fact, if I could be anywhere in the world right now I would be in Thailand – I have some wonderful memories from the time I spent there.’

After university Toni started work in the commercial finance sector; she now has more than 8 years of experience with particular experience in fire and security related assets. 

Bluestone and the future

‘I could tell from my interview with Bluestone that it is an ethical and moral company. From my first conversation with the managers and team members it was clear that ethical practices were not just a slogan, but an intrinsic part of the operation. They strive for excellence and I am proud to be joining the team.’

When it comes to her free time Toni has a young daughter who she loves to spend time with, her pet peeves are whistling and people who are dishonest, and she is surprisingly good at training dogs! 

In terms of making plans for the future, Toni would love to take a road trip through America, if she could change one thing about the world, it would be inequality, and she would like to be remembered as a decent, supportive, positive person who made the most of life. 

If you would like to find out if Toni could help your business to grow through a bespoke asset finance solution, get in touch today: toni.mcleod@bluestoneleasing.com.

What is a Corporation Tax Loan? Key Features and Benefits

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IMPORTANT NOTICE: From 1 April 2023, the Corporation Tax main rate for non-ring fenced profits will be increased to 25% applying to profits over £250,000. A small profits rate (SPR) will also be introduced for companies with profits of £50,000 or less so that they will continue to pay Corporation Tax at 19%. Companies with profits between £50,000 and £250,000 will pay tax at the main rate reduced by a marginal relief providing a gradual increase in the effective Corporation Tax rate.

What is a Corporation Tax Loan? Key Features and Benefits

Every business has to ensure that they pay their tax bill on time, but often this can arrive at an inconvenient time. Given the current economic climate, many businesses may find that making monthly payments over a fixed term provides them with a vital cash injection, giving them a competitive edge by allowing existing funds to be used elsewhere within your organisation. In some cases, the business may also benefit from interest tax relief on the facility.

Read on to discover more about corporation tax loans.  

What is corporation tax?

In simple terms, corporation tax is a direct tax that businesses must pay as soon as they start making a profit and then on an annual basis thereafter. 

The corporation tax rate is set by the government. In 2022, the main rate on all profits (except ring fence profits which are subject to different rates) are subject to a flat rate of 19%. The amount of Corporation Tax a business is required to pay is calculated as a percentage of that business’ taxable profits. It is not enough to simply look at net profit, there are several tax-adjusted trading profits that must be calculated to pay corporation tax.

All limited companies must pay Corporation Tax annually. Both small and large companies are required to pay a flat rate of 19%, but within the thresholds of company size, a system of ‘marginal reliefs’ exist which can reduce the amount of Corporation Tax your business ends up paying. These include:

  • Creative Industry
  • Research & Development
  • The Patent Box
  • Disincorporation Relief
  • Marginal Relief
  • Terminal, capital, property income losses and trading losses

Visit the government website for the latest corporation tax rates and more guidance on calculating your corporation tax. 

When should corporation tax be paid?

Unlike self assessment tax bills, corporation tax is not due at the same time for all businesses. Corporation tax is both calculated and paid annually around your ‘corporation tax accounting period’, typically around the same time as your business’ financial year. 

For this reason, businesses are not sent bills for corporation but are required to: 

1. Register for corporation tax within 3 months of your business starting to trade (dormant companies are not required to register)

2. Maintain accurate accounting records and prepare a Company Tax Return which will help you work out how much Corporation Tax to pay

3. Pay your Corporation Tax by the deadline (nine months and one day following your accounting period from your previous financial year)

4. File your Company Tax Return before the deadline (12 months after the end of the accounting period covered).

If your period exceeds 12 months for financial statement purposes, two tax returns are required to be submitted.

How is corporation tax paid?

There are several options of methods for payment, but businesses must ensure they allow time for the payment to reach HMRC before the deadline. Options include CHAPS, online banking, telephone banking, direct debit, and BACS. Depending on the method of payment you choose, payments could arrive on the same day as they are sent or could take up to 5 working days. 

What if you can’t afford to pay your corporation tax bill?

Failing to pay your corporation tax bill on time can carry serious penalties. Charges begin from the day your payment is late, and interest accrues over time, putting you in a worse financial situation, so it is essential to meet payment deadlines. Continued late payment of corporation tax can result in HMRC taking further action, in the worst-case petitioning for the compulsory closure of your business.

If you are unable to pay your tax bill or there is a chance that you will need to pay after your deadline, you need to contact HMRC as soon as possible. In some cases, HMRC may be able to offer you a payment plan referred to as a Time To Pay arrangement (TTP). This enables some businesses to pay back the tax they owe in instalments. However, TTP is intended as a one-off payment plan to allow extra support, but continuous late payments are likely to result in HMRC asking you to pay the outstanding amount in full.

In order to be eligible for the TTP payment plan, businesses must: 

  • Have no extra HMRC payment plans set up
  • Have no other tax debts outstanding
  • Owe less than £10,000.

Alternatively, businesses might consider taking out a corporation tax loan. 

Why consider a corporation tax loan? 

Using a commercial loan to pay corporation tax bills to reduce the impact of costly late payment fines can be a cost-effective way to utilise cashflow and resources. A corporation tax loan will incur interest, but it enables the business to spread their bill over 6 to 12 months through fixed monthly or quarterly payments. The loan can be secured or unsecured. 

The most common reasons for using a corporation tax bill include: 

  • Spreading the cost of a tax bill, retaining capital and therefore spending power, which in turn can allow for increased competitiveness, growth and expansion.
  • Maintaining a stable and fluid cash flow so they can take advantage of new opportunities and/or fund unexpected costs or drops in income. 
  • Avoiding the risk of high penalties from HMRC for late or non-payments. 

IMPORTANT: Taking out any commercial loan should be approached with caution as if your business’ finances are not in a healthy condition, there is a risk of getting into more debt.

Interested in a corporation tax loan for your business?

We can help businesses like yours to obtain the best funding options and facilities, quickly and efficiently, whilst ensuring their short-term goals and long-term ambitions are considered in their financial strategy.

If you are interested in spreading the cost of your corporation tax bill over time to retain capital and enable you to manage your budget more effectively, get in touch with us today.

We will assess your business’ individual circumstances and work with you to decide if a corporation tax loan or another finance solution would be the right choice.

Complete the form below to send us an enquiry.

Creative Finance 2: R&D Tax Credits

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What could your business do with an extra £57,000?

Before we launch into chapter 2 of our Creative Finance series on the government’s Research & Development (R&D) tax credits scheme and how it could save your business money, we need a disclaimer…

At Bluestone Leasing we try to make our content as interesting and accessible as possible, because we want you to make the best financial decisions for your business. A big part of that is making you aware of how your business could save money through tax relief schemes, but we are the first to admit it’s not always the most thrilling or easy to digest topic. So, while we’ve had a darn good go at explaining R&D tax credits as simply as possible, if you can’t stay awake until end of the article, or you are unsure of whether it is relevant for your business, PLEASE don’t dismiss the topic and make sure you seek advice from a reputable accountant. 

Why are we so keen that you get the right advice on R&D tax credits? Because many businesses do not realise that they can apply, and the average R&D tax credit claim for small businesses in 2018-2019 (according to HMRC’s latest statistics on R&D Tax Credits report dated 30th Sep 2020) was over £57,000.

Can your business afford to let that kind of money slip away?

What are R&D Tax Credits?

Technology and science are moving on rapidly, and in order for companies to stay competitive, they have to keep up. R&D tax credits are a government tax incentive intended to encourage and reward companies that invest time and resources in research and development that could benefit the whole UK economy.

That reward is the R&D tax credits scheme which reduces the amount of corporation tax that a company pays, or acts as a cash payment when companies are making a loss.

Which businesses can apply for R&D tax credits?

Many businesses assume that R&D tax credits their activities would not qualify as research and development, or that only companies working in laboratories or engineering workshops can apply.

In reality, any business that pays corporation tax can apply for R&D tax relief, as long as the research and development they are engaged in is original, unique, and has the potential be a ‘game-changer’ for their industry (not just their company). 

Which projects are eligible for R&D tax credits?

If your company puts resources towards creating a new, improved and original product, service or process (that competitors cannot replicate easily), you could claim tax relief on the money spent in the effort. This might include creating new products, processes, software, services or devices not available elsewhere on the market, or making appreciable improvements to existing products, processes, software, services or devices.

Successful R&D projects may lead to patents, trademarks, or breakthrough discoveries with lasting benefits to the company, but even R&D projects that do not produce results could be eligible for R&D tax credits. 

What expenses would qualify for research and development tax credits?

The expenses your company incurs in trying to overcome challenges and innovate can form the basis of an R&D tax credit claim.

The following cost categories may be included:  

  • Expenditure on staff including gross salaries, employer NIC, bonuses, car allowances, and employer pension contributions.
  • Expenditure on subcontracted R&D activities, e.g., paying a website or software developer, legal fees, branding costs.
  • Expenditure on agency workers.
  • Expenditure on fixed assets, consumables and materials (including light, heat and water).

You can make a claim for R&D relief up to two years after the end of the accounting period it relates to. You’ll need to file an amended corporation tax return and depending on the type of relief you’re claiming, rates may differ.

How much tax could R&D relief save you?

There are two different types of R&D tax relief available depending on the size of your business and if you’ve been subcontracted. 

  • SME Research & Development Tax Relief
  • Research and Development Expenditure Credit (RDEC)

SME Research & Development Tax Relief

The small and medium-sized research and development relief is the most common option for small businesses. You must have less than 500 staff and a turnover of less than £100 million.

This scheme allows you to deduct an extra 130% of qualifying costs from your yearly profits, as well as your normal 100% deduction, totalling 230%. In addition, SMEs that subcontract qualifying R&D activities can claim tax relief on 65% of the payment to the subcontractor.

For example:

Project costAmountAmount eligible for R&D tax relief at 130%
Staff basic salaries£176,672.91£229,674.78
  Staff National Insurance£21,582.97£28,057.86
Subcontractor invoiceTotal = £111,326.70
65% of subcontractor invoice = £75,362.36		£94,071.06

The total amount that is eligible for R&D tax relief is £351,803.70.

Paying 19% corporation tax on that amount results in a cash benefit to the business of £66,842.70.       

There is no minimum claim amount under the R&D Tax Credits SME scheme, and 72% of the claims made in 2018-2019 (according to the latest report) were claims of up to £50,000.

If your company is making a loss, you can claim R&D tax credits worth up to 14.5% of the surrenderable loss.

A note about taxable losses

It’s predicted that only 10% of all companies in the UK in the tax period 2021/22 will be reporting a taxable profit over £250,000.

R&D credits are a primary tax relief and can reduce your company’s Taxable Profits below £0.  creating a taxable loss. The Annual Investment Allowance and Super Deduction, however, are final tax reliefs, and so can only reduce taxable profits to £0. This means that if a taxable loss situation would occur, it would not be tax-effective to utilise a Hire Purchase, loan or to use cash to pay for assets.

Research and Development Expenditure Credit (RDEC)

RDEC is aimed at larger companies, but as a smaller business, you can claim it if you’ve been subcontracted to do R&D work for a large company. As of 1 April 2020, you can claim relief on 13% of qualifying R&D expenditure. In 2018-2019, the average claim by a large company was £332,000.  

To find out if your business could be entitled to R&D relief, your first port of call should be a reputable accountant with the relevant experience. However, it is important that the accountant you choose is covered by indemnity insurance. This insurance will add an additional layer of protection to your claim should your accountant provide inaccurate advice on which activities are eligible for R&D tax relief.

Next time…

In chapter 3 of The Creative Finance Mission series we’ll be covering the topic of saving your business money by switching from petrol and diesel to electric vehicles.

Click here to subscribe to the series and we’ll let you know when it’s been published.

Creative Finance 1: Green Up Your Act with LED Lighting

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We won’t insult your intelligence by talking about the impending doom of global warming, pollution, climate change, the destruction of the natural world, or the number of species we are driving into extinction. You’re not here for an environmental lecture, and we’re certainly not qualified to deliver one, so we won’t go there. We’re not even going to mention the fact that we are running out of the fossil fuels that our society has relied on for centuries. Honestly. Not a word.

You’re a busy person and, as much as you want to help the planet, the reason you’re reading this article is to get tips on how to reduce your business’ outgoings. Luckily, this article explains how you can do both.

In partnership with CEMA Lighting, this Creative Finance chapter explores how replacing inefficient lighting on your premises with LEDs could reduce your energy usage at least than 50%, simultaneously saving your business money and reducing your carbon footprint.

Why switch to LED lighting?

LED stands for light emitting diode which is a semiconductor device that generates light when electricity passes through it (thanks to a process called electroluminescence).

That’s as scientific as we’re going to get, but thanks to one of our partners, CEMA Lighting, we can tell you about the practical, financial and environmental benefits of switching to LED lighting.

LED lighting is cheaper to power

LED lighting is significantly more energy-efficient than many traditional lighting systems as it produces more ‘useful lumens’, i.e., less of the energy consumed by the light is wasted through heat dissipation. This makes LED lighting at least 50% cheaper to power, depending on the type of lighting being replaced.

LED lighting is better for the environment

Because LED lighting uses electricity more efficiently, your business’ energy consumption and therefore your impact on the planet should reduce by at least 50%. 

LED lighting lasts longer

After 25,000 hours traditional lighting will be operating at less than 80% of its potential output. An LED lightbulb lasts, on average, for 50,000 hours and, if used efficiently, for as long as 100,000 hours.

LED lighting is low maintenance

In addition, LED lights do not include mercury like fluorescent and mercury vapor lights, so they do not require the same maintenance or management at the end of their life.

LED lighting provides a better quality of light

You can see from CEMA Lighting’s before and after photos just how much improvement can be seen when businesses switch to LED lighting. This delivers improved visibility and colour clarity, safer working conditions for staff and improved security and CCTV footage.

Introducing CEMA Lighting

With the UK government setting a target for carbon neutrality by 2050, CEMA Lighting offer sustainable, cost effective LED lighting solutions for environmentally responsible businesses. Between 2020 and 2021, CEMA saved British companies over 2,000 tonnes of CO2. That is the equivalent to heating the average home in Britain for 1,250 years and the same weight as 350 African elephants.

CEMA Lighting’s Case study of RDC

RDC is an IT disposal and recycling company in Braintree. They were using traditional luminaires that consumed lots of energy.

CEMA Lighting replaced the outdated fittings in RDC’s production area with their exclusive Super Lumen High Bay which delivers an impressive 190 Lumens per Watt efficiency. The LED lighting has an anticipated lifespan of 100,000 hours, consumes 58% less energy and offers a brighter and whiter light, ensuring that the production area was lit to over 300 lux (in line with recommended guidelines).

In the offices, RDC were using panel lights that only converted 70-90 Lumens per Watt. These were replaced with CEMA Lighting’s contemporary Halo panel which uses 75% less energy, has triple the lifespan of the system and provided a modern, sleek and professional design throughout the area.

What was the impact?

  • Annual running costs have been slashed by 59%
  • Annual CO² emissions cut by 299.75 tonnes
  • Light levels on the premises have been improved by 30%

“The benefits from the lighting upgrade have been incredible through improved look and feel to the lighting, reduction in energy usage and a dramatic impact to CO² reduction.”

Cole May, RDC

To read about the many UK businesses that have already benefitted from switching to LED lighting, visit www.cemalighting.co.uk/case-studies.  

How much does LED Lighting cost?

At this point, you’re probably thinking, That all sounds lovely, but how much is LED lighting installation going to cost?, or something to that effect.

The answer to this depends on so many factors such as the square footage of the area you want to light, the lighting being removed, the type of lighting being installed, and the complexity of the job in general, so it’s difficult to estimate a price.

Luckily, CEMA Lighting offer free no-obligation lighting audits to UK businesses. They do this by examining your current lighting system and discussing what requirements you have, as well as considering temperatures or sensitive environments which require food safe or anti-explosive specifications. CEMA Lighting will also conduct a full financial analysis to validate investment with cost efficient changes, which is then displayed in a bespoke cost of ownership outlining savings and return on investment.

Here are just a few of businesses CEMA Lighting have worked with to reduce their annual energy bills. NOTE: These percentages outline the savings focused on commercial lighting installations only.

CompanyReturn on InvestmentAnnual Energy SavingsAnnual CO² Savings
Isuzu1.80 Years79%4.63 Tonnes
JKL Mouldings1.30 Years  66%22.79 Tonnes
Actavo1.86 Years62%7.60 Tonnes
Crittal Windows0.90 Years77%105.88 Tonnes
Donaldson0.82 Years*61%147.32 Tonnes

*In this case CEMA Lighting conducted a grants and funding investigation which covered 19% overall project cost.

Funding Your LED Lighting

Switching to LED lighting in your business could reduce your carbon footprint and save you a significant amount of money on your energy costs, but how will you pay for it?

While some businesses might choose to pay for LED installation by taking cash out of the business, that is not always the most cost-effective route. In fact, an increasing number of businesses are choosing to spread the cost of their LED lighting and other renewable technology over time with a bespoke asset finance solution. Doing so could enable you to:

  • Spread the cost of installation over time
  • Keep cash in your business for other growth projects
  • Manage your budget easily thanks to the fixed repayments
  • Save money on taxes, as leasing costs are 100% deductible.

In fact, in many cases, the money saved by reducing running costs more than covers the monthly finance payment, making the whole project cost positive while simultaneously ‘greening up your act’. The table below illustrates some potential costs vs savings.

Total cost of projectMonthly repayment
(3 year agreement)		Monthly energy savingAnnual energy savingTotal saving per annum
£100,000£3,275£3,470£41,640£2,340
£50,000£1637£1,733£20,796£1,146
£10,000£327.50£347£4,164£234
NOTE: These figures are intended as an illustration, actual costs and savings will vary depending on the project scope and terms of the finance agreement.

Next time…

In chapter 2 of The Creative Finance Mission series we’ll be covering the topic of increasing your business’ income by claiming Research and Development tax reliefs.

Click here to subscribe to the series and we’ll let you know when it’s been published.

Introducing: The Creative Finance Mission

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“The ‘bosses’ are panicking. They’re going, ‘Oh, cut back, lose staff. That’s the way forward. That’ll save money.’ Will it? Who’s to say that hiring staff won’t save money in the long run?“

“New Girl”, season 1, The Office (UK), BBC Two, 2001.

If you recognise these words, and the noughties TV character who bit his goateed lip as he said them, you are probably cringing a little right now. Sorry.

But, confused and slightly illogical ideas aside, it is also worth remembering that the same man had previously increased profit in his branch by 17% and cut expenditure without losing a single member of staff (neither of which were his proudest moments, by the way). So, inept and fictional as David Brent was, is there something to be said for a more creative approach to business?

We think so, and have put together a brand new series of articles to put our money where our mouth is.

What do all businesses want? More money in, less money out.

It’s a straightforward concept, but easier said than done. Common strategies include increasing prices, losing staff, expanding your product range, working longer hours, switching to cheaper source materials, or simplifying your service, but none are particularly appealing.

Ideally, your goal should be to increase your income and reduce your expenditure without reducing the quality of your service or product, or impacting quality of life for you or your staff. Some might say that it’s not possible, but with some creativity and the right guidance, we know that it is.

Every two weeks we will be releasing a new chapter with tips, ideas, and innovative strategies on how you can be more creative in your approach to business finance. Each chapter will highlight and explain a different financial tactic that could increase the money coming into your business, reduce the money going out, or both.

At Bluestone Leasing we have been helping businesses across all sectors to grow and thrive through commercial finance for over 25 years, including a few economic recessions and a global pandemic, and we have more than enough experience and expertise to share.

But we won’t be the only ones putting our ideas into the “melting pot” (again, sorry), and we aren’t in the business of preaching where we don’t practice. Several of the chapters will be created in collaboration with clients and partners who are living proof that these creative financial tactics can have a significant impact in the real world of business.

If tips and strategies that will increase the money coming into or going out of your business sounds appealing, click here to subscribe to the Creative Finance series and we’ll let you know when a new chapter has been published.

“The growth and stability of UK businesses inevitably leads to a stronger UK economy, and that is what the team at Bluestone Leasing are striving towards. We have so much commercial experience and financial knowledge in the team that could be gold dust in the right hands, and we are excited to share it through our new Creative Finance series.”

Vineesh Madaan, Managing Director, Bluestone Leasing

The Rise, Fall, and Return of the Subscription Model

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At 9 months of age I was already toddling. I was taking regular breaks and using plenty of furniture to steady myself, but I was up and mobile. Unfortunately, one of my laps of the lounge culminated in me sitting on top of the VCR. I was sans-nappy, and decided that was the moment to, shall we say, relax. This led to an awkward telephone conversation with a woman at Radio Rentals who laughed – quite mercilessly – at my mum’s reason for needing a replacement.

Why am I telling you this charming family anecdote? While researching this article (that was going to be called, ‘The rise of the subscription model’), I found lots of blogs that suggested the idea of subscribing to a service was an emerging trend. Someone born in the digital age might assume that the subscription model is a relatively new concept made successful by the likes of Netflix, Spotify, Birch Box, or Hello Fresh.

But, because they have gleefully told that story at numerous family gatherings, I knew that my parents were making monthly payments for their VCR and TV back in the 1980s. Sure enough, a little research confirmed that paying a regular fee in return for services or products has been around a lot longer than many people realise.   

The birth of the subscription model

The earliest description of paying for a service in instalments (that I found) dates back to the 1500s when European cartographers were publishing maps of previously undocumented land that was being discovered, occupied, and conquered. The aristocracy and academics were buying these maps, but always in the knowledge that updated editions would be forthcoming as exploration continued. The map publishers asked customers to subscribe to future versions of their maps, and the ongoing payments funded their ongoing explorations and map production.

The most well-known example of an early subscription model is the newspaper and magazine industry which, as far back as the 17th century, was encouraging customers to subscribe to regular publications to cover overheads and delivery costs. Over the years several different types of subscription models have emerged.

Today, for a monthly fee, you can receive a box delivered to your home full of just about any product from socks and make-up to chocolate and your evening meals. Some are mysteries that have been curated especially for you by an ‘expert’, or for a monthly or annual fee you can access exclusive content or events. We can have the latest gym equipment, vehicles, mobile phones, software, and technology, as there are very few items that we need to own to use.

The pursuit of ownership

While paying as we go has been part of our society for so long, we can’t get away from the fact that, in the UK, renting or leasing has been regarded as inferior to ownership. A possible reason for this is that as technology became more affordable, renting/leasing became less common and gradually took on negative connotations; only someone who could not afford to buy something outright would need to spread the cost in that way. Combined with our national perception of property ownership as a symbol of success (not a universal attitude by any stretch), and the concept of renting/leasing became tainted.

However, skip a few frames to today, and our buying habits and attitudes are changing at a faster rate than ever before, more so than many of us realise. We don’t ‘go shopping’ anymore – we ‘are shopping’ at all times. We can make a purchase at any time of day or night, from anywhere in the world with an internet connection. If we cannot afford to pay for it all in one go then and there, we expect to be able to pay in instalments. Maybe we can’t afford £300 or £3,000 today, but £50 or £500 per month for the next 6 months? More than doable.

The rate at which technology moves on, and the fact that we are being marketed to from every direction all day and night, are also major influences on our buying habits. When we buy a product, in a matter of months, a new improved version will be released. We buy products not as long-term investments, but in the knowledge that in a few months or years we will want to upgrade or try something new. There is little point investing in assets that are going to depreciate in value or become obsolete, so paying a large chunk of cash to own something has become less attractive.

The past, present, and future of finance is flexible

It seems that negativity towards leasing in general is fading, but there is a stubborn perception in several industries that suggesting finance to customers will cause offence in some way, i.e., that they will imply they cannot afford to pay in cash. In reality, this is a rather outdated view, as choosing to pay via a subscription model or a finance lease often has nothing to do with affordability.

Customers want convenience and flexibility. They expect to be able to shop and pay in the way that is most convenient to them. They might shop online, on the high street, in the markets, or a combination of all three. They might pay upfront in cash, or they might decide to take out a flexible subscription, or to pay in instalments via a finance deal.  

Service providers that do not recognise the need for greater flexibility are running the risk of lagging behind their competitors. Offering more flexible finance arrangements creates a longer-term relationship with a customer beyond a single transaction, increasing customer lifetime value. This type of arrangement has been working since the cartographers of the 1500s found a way to fund their exploration of the world. It has been enabling individuals, families, and businesses to access the technology they need to thrive, whether that technology is a mobile phone, a VCR or 500 state-of-the-art laptops for their employees.

The subscription model, leasing, and renting technology are not new ideas, and it’s likely that they will continue to benefit both customer and service provider for many years to come.

Click here to read the story of Greg, Techtron IT Solutions and how partnering with a finance provider boosted their business.