Inflation rates, procurement, import duties, lump sum death benefit charge, and Labour’s plans to close the tax gap – a bit of a mixed bag in today’s blog post from MLS Accountancy!
Inflation falls in March
According to the latest figures released by the Office for National Statistics, the Consumer Prices Index (CPI) rose by 3.2% in the 12 months to March 2024. This is down from 3.4% in February.
The main reason for the change was that prices for food are rising by less than a year ago. The cost of meat, crumpets, and chocolate biscuits all fell, as did furniture and household goods.
Offsetting these falls, motor fuels have risen over the past year whereas they were falling a year ago.
Of course, while the inflation rate is lower, it is still positive which means that prices are still going up, albeit at a slightly slower rate.
A decreasing inflation rate does though provide some positive news for businesses. It could mean less pressure on your own costs and your profit margin. As the cost of living eases, the purchasing power of more consumers increases and this can create more demand.
The Bank of England will be watching the CPI to determine its next move on interest rates. While there is still a way to go to reach the 2% target, the latest news is encouraging that we may see a reduction in the base rate sooner rather than later.
See: https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/latest
Procurement – can the principles work for smaller businesses?
The government recently published a press release congratulating its procurement department on its 10th anniversary for saving taxpayers £3.8 billion last year.
Larger corporations often have dedicated purchasing departments to handle procuring supplies, services and other business purchases. Specialising in this way allows for finding or negotiating the best deals for purchases and can save businesses considerable amounts of money.
Savings are welcome in businesses of all sizes, but smaller businesses may lack the resources to have a specialised purchasing function in the business. Can businesses without a dedicated purchasing department still harness the benefits of procurement?
We would say yes, here’s how:
1. Embrace technology
There are procurement software and online platforms available that can streamline purchasing processes. See how you can make use of them in your business.
Many affordable solutions cater to small businesses, offering features such as vendor management, purchase order creation, and expense tracking. These tools can help you to automate repetitive tasks and give you insights into spending patterns.
2. Centralise purchasing authority
Designate a specific individual or team within your business to oversee purchasing.
This will enable you to establish clear guidelines for how purchases are made and allow you to introduce some controls to make sure that purchases are made within the bounds of predetermined policies. It can be surprising how many purchase requests disappear, can be reduced, or a cheaper price can be found if the buying process can be governed by a procedure.
A further advantage is that duplicate purchases are avoided, and it is often easier to negotiate better deals with suppliers when you have a single point of contact building a relationship with them.
3. Foster supplier relationships
Even without the leverage of large-scale purchasing volumes, small businesses can still negotiate favourable terms, discounts, or flexible payment arrangements with suppliers.
Why not see if you can take a supplier to lunch or make a point of remembering an anniversary and sending flowers. Building long-term relationships may make preferential treatment or access to exclusive deals possible.
4. Implement cost effective sourcing strategies
You may have alternatives for sourcing purchases that go beyond traditional suppliers. Local businesses, online marketplaces, or group purchasing organisations might be able to get you access to more competitive pricing and a wider range of products or services.
You may find that another business would be happy to pool resources so that together you can meet minimum order quantities that give you a lower price. Or you could explore joining a cooperative buying network.
5. Invest in employee training
Help your employees to develop the skills and knowledge to make informed purchasing decisions. There are training sessions or workshops available on procurement best practices, budget management and how to evaluate suppliers. Some of this training can be accessed free or at low cost.
6. Monitor and improve
As with any aspect of business, measuring performance helps you to identify where you are currently and see progress. Monitoring costs savings and supplier performance could help you to see areas that can be further optimised.
Regularly reviewing your procurement processes will also help you spot areas that can be improved and give you additional savings.
In conclusion, while smaller businesses may lack the resources for a dedicated purchasing department, you can still gain significant benefits by applying procurement principles in your business.
Doing so, will help you gain a competitive edge in the marketplace and fuel your ongoing growth and success.
If you would like any assistance with identifying how you could save money with your business’ purchasing, we would be happy to help. Please just give us a call.
New service to manage import duties and VAT accounts
HM Revenue and Customs (HMRC) have published guidance on a new online service to help businesses with their import duties and VAT accounts.
If you or your business are involved in importing goods into England, Scotland, Wales and Northern Ireland, you can use the new service to:
- Get your import VAT statements and certificates;
- Manage your payment accounts; and
- Manage or view authorities.
This new service should help to bring everything you need into one place.
To use the service, you need to have a Government Gateway user ID and password, and you must be subscribed to the Customs Declaration service.
If you need any help registering with HMRC, please do not hesitate to contact us!
For more information and to log in, please see: https://www.gov.uk/guidance/manage-your-import-duties-and-vat-accounts
Lump sum death benefit charge – what do you need to tell HMRC?
New guidance has been published by HM Revenue and Customs (HMRC) to help legal representatives find out what they need to tell HMRC to calculate the lump sum death benefit charge.
When someone passes away and their estate includes certain financial products like pensions or life insurance products, any lump sum death benefit received by the beneficiaries might be subject to inheritance tax.
If a lump sum death benefit charge applies to the payout, it could affect the overall value of the estate and potentially impact the inheritance tax liability. Therefore, it’s important to accurately report this information to HMRC to make sure that the overall tax paid is correct.
The new guidance sets out what the legal representative must do and the information they will need to provide to HMRC.
If you need any help with Inheritance Tax or would like to see if there are any planning measures that could mitigate Inheritance Tax on your estate, please contact us. We will be happy to help you.
For the guidance, please see: https://www.gov.uk/guidance/how-to-tell-hmrc-about-a-lump-sum-death-benefit-charge
Labour party publishes plan to close the tax gap
The Labour party has published their plan to close the tax gap – the gap between tax owed and tax paid – which is estimated at £36 billion.
The plan broadly proposes to do this by boosting tax compliance. Labour plan to be able to raise up to an additional £5 billion a year as a result of their proposed measures. They anticipate that £1 spent on compliance activity will result in £9 of revenue and so reckon they will need to invest £555 million per year to achieve £5 billion of revenue.
Some of the measures they propose introducing includes:
- increasing staffing at HM Revenue & Customs (HMRC) with an additional 5,000 staff.
- Focusing additional resource to target businesses with greater complexity and return.
- Ring-fencing “blockbuster” funding that can be used on strategically important criminal cases to increase the deterrence effect that a high-profile case can bring.
- Improving customer service at HMRC.
- Investing in digitisation and technology.
The plan also notes areas where changes to the law may be needed to help tackle tax non-compliance. This could include regulating the tax advice market and requiring a wider range of tax schemes to be reported to HMRC.
For more details on the proposals, please see: https://labour.org.uk/wp-content/uploads/2024/04/Labours-Plan-to-Close-the-Tax-Gap.pdf