PRIME business club

Barclays Bank is running another programme of free business seminars around the UK, in conjunction with the National Federation of Enterprise Agencies. The previous series proved very popular. The NFEA is the umbrella group for UK enterprise agencies - organisations that offer free or low-cost business support. PRIME is a member of the NFEA, and is happy to endorse the programme.

There are two types of seminar, half-day workshops aimed at complete beginners and full day workshops for those closer to starting.

The half-day events are called Let’s Talk Business Ideas and are for people still considering whether self-employment is for them.

The full-day event, Let’s Talk Starting in Business, covers finance, marketing, time management, negotiating skills, networking and writing a business plan. 

Details of venues and times are in the spreadsheets on the above links.
If you have problems accessing these links, please contact Rebecca Buckingham or call 01234 831623.

If you have a low income it is possible you have lost out by the abolition of the 10p starter rate of income tax. So the current row about recent changes may affect you. But how?

According to the respected and non-partisan think tank the Institute for Fiscal Studies (IFS)

The impact of Mr Brown’s income tax changes on an individual taxpayer goes as follows: last year people under 65 paid no income tax on the first £5,225 they earned, 10% on the next £2,230, and 22% on the next £32,370; this year they will pay nothing on the first £5,435 and 20% on the next £36,000.

Taken in isolation, this means that people on incomes between £5,435 and £19,355 this year would be worse off, because they lose more from the abolition of the starting rate than they gain from the cut in the basic rate. The loss is greatest at £232 a year for someone earning £7,755.

Most people on incomes between £19,355 and around £40,000 would gain noticeably from the reform, with the biggest gain of £337 a year at £36,140.

However, that is not the end of the matter. Gordan Brown simultaneously made changes to tax allowances, Child Tax Credit and Working Tax Credit that go a long way to compensate people on lower incomes who have lost out - or they would if people claim everything they are entitled to.

So taking the whole budget package into account, and assuming everyone goes through the rigmarole and claims means-tested tax credits, how does the picture change?

The IFS again:

Roughly one family in five loses; two in five gain and the rest are unaffected.

Most of the losers are of two sorts. First, childless single people who do not qualify for the working tax credit because they [...] work less than 30 hours a week, or earn too much.

Second, childless couples who lose twice from the income tax changes, but gain at most once from the working tax credit because it is a family payment rather than an individual one.

Another vocal category of loser is early retirees, who do not receive tax credits, but who are too young to benefit from the increase in the tax allowance for those aged 65 and over.

The IFS goes on to make various recommendations about how the policy can be changed at this late hour. Some concessions are likely with local elections coming up and a revolt of Labour MPs in the offing. But the moment it is too early to say exactly what the final outcome will be.

One fact though is clear. The way the tax system is changing it is becoming increasingly important for people in work to claim things like Working Tax Credit and Child Tax Credit. Far from being welfare benefits separate to the tax system, the government is increasingly making them part of normal taxation. If you don’t claim you are in effect paying tax at the wrong rate, and losing money.

LATEST from BBC on 10p tax rate row

Full IFS article on abolition of the 10p starting rate

PRIME guide to how to claim Working Tax Credit

Neat tax calculator to check roughly what you pay

Computer giant Dell has introduced its Small Business Excellence Award to the UK, in conjunction with the Daily Express and British Chambers of Commerce.

The awards are aimed at companies employing less than 100 people that can show they have used technology to deliver “superior customer value and experience” and improved customer relationships.

Prizes include £15,000 in Dell products and services for the top UK winner, and nine other UK Finalists will get a Dell laptop and membership of their local Chamber of Commerce.

Closing date for entries is 31 May 2008. You can apply online on the Dell site. There is more background about the contest at the British Chambers of Commerce web site.

These awards have been running for five years in the US. This is their first year in the UK. The top UK winner will also get a crack at the global £25,000 prize.

Barclays is now accepting entries to its fourth annual Trading Places business awards.
You can enter if you have been trading for between three months and three years, live in the UK and have an annual turnover of under £1 million. The closing date is the 30th of May 2008

This award differs from most in that it’s about overcoming adversity. So if you have got your business going after a struggle it might be worth entering. Here are the stories of last year’s finalists.

The winner and runner up receive £10,000 and £5,000 respectively from Barclays Bank, and a selection of Microsoft business software. For more information about entering ring the awards office on 0800 085 3203 or visit www.barclays.co.uk/tradingplaces.

From October 2008, a new benefit called the Employment and Support Allowance (ESA) will start replacing Incapacity Benefit and Income Support for those unable to work due to a disability or long-term illness. The new system will apply to new claims from 27 October 2008. Those with existing claims accepted before that date will continue to be paid on the existing system for another two years.

At the moment you can apply for Incapacity Benefit or Income Support, or sometimes both under a confused system that will eventually be completely scrapped.

At the heart of the new system is a new medical test, the Work Capability Assessment, designed “to look at what people can do rather than what they cannot” according to the government press release.

ESA claimants will be split into two groups based on the results of the test: those judged able to take part in some form of work and those who can’t. The amount of money you receive and the sort of training, if any, offered depend on which group you fall into. Meanwhile Jobseekers Allowance will continue to be available for those without health problems who quailify.

These changes are all part of the 2007 Welfare Reform Act, which is only now becoming law as the relevant provisions are enacted. You can read the detailed regulations passed at the end of March here.

There is a good discussion on BBC Moneybox on how these might affect real claimants.

The new system has had little detailed coverage in the press, with most media outlets ignoring it or treating it as an opportunity to comment on benefit fraud. However, the whole welfare reform process has been dragging on for some time. Many of these changes were announced last year by then Work and Pensions secretary Peter Hain, prior to his resignation in a scandal over alleged failure to properly declare over £100,000 in political contributions.

Official DWP page

Get tough tests face the sick on benefit

Is Labour abolishing illness?

Owners of small businesses selling all or part of their business will only pay capital gains tax at 10 per cent. Months of speculation about changes to Capital Gains Tax were finally clarified in the Chancellor’s 12th of March 2008 budget report.

The 10 per cent rate applies only to the first £1 million of assets sold during a person’s lifetime. This so-called “Entrepreneur’s Relief” is a response to criticism of the original proposals.

These would have treated people selling small businesses they had laboriously built up themselves in the same way as big private equity firms that just buy and sell assets - hitting both with the same high rate

Tax expert Penny Bates comments on the BBC site

More about tax and disposing of a business at the HMRC site

In other budget news, the Small Firms Loan Guarantee scheme will get extra funding to encourage the banks to lend small businesses they might otherwise consider too risky. And a new capital fund will be set up to encourage female entrepreneurs to grow their businesses.

Other measures are promised to make it easier for small firms to bid for public sector contracts.

This is an update to an earlier post on the same topic. Our basic position hasn’t changed:

Remember: grants to small businesses are relatively rare in the UK, usually have strings attached and are unlikely to give you 100 per cent of the money. Customers are the real people who can grant prosperity to your business, and where you should put your main effort.

But we’ve added some new links if you decide nonetheless to spend a little time hunting for them.

Introduction to business grants

Grants to ordinary businesses are not the rule in the UK, and vary from place-to-place and time-to-time. There has to be a reason why a grant-giving body would want to support you - for example to regenerate a particular run-down neighbourhood, to encourage the survival of some craft skill or to ameliorate some economic disaster afflicting a particular industry.

Except in the last case, a grant can be thought of as a kind of bribe to change your business behaviour. Expect there to be strings attached.

Applying for a grant can be a very complicated process, and even if you get it the grant will often only cover part of your project costs. You will still have to find the rest from other sources.

Q: Where can I find a grant?

A: Local Business Links are a usually a good source of information about any publicly-funded grants currently on offer in your neighbourhood. For example, grants are sometimes available for doing up premises or improving shop displays, particularly in regeneration areas. The geographic area in which such grants are available is often very precisely defined.

If you are involved in the agricultural sector or certain types of rural business a complex system of financial incentives and schemes apply. This is the most heavily grant-aided part of the economy, but as usual strings are attached and finding your way to the money can be difficult, The best place to start is Defra itself.

Internet search sites can help find a wide range of public, private and charitable initiatives. Apart from Google, there are some specialised funding search sites you can try.

Grantnet is one of three similar services for finding UK grants online. They provide a basic service free, and often have contracts with local authorities or regional development agencies to provide an enhanced service in a particular area.

www.grantnet.com

www.grantsnet.co.uk - a rival service despite similar name

www.j4b.co.uk

For example, many Yorkshire councils offer a full Grantnet service. To find it, you just put the word “grantnet” and the area you are searching for, in this case “yorkshire”, into a search engine like Google. Click to see what this looks like.

This approach also works for Northern Ireland, the Black Country or anywhere else you want to search for.

Here’s a Wolverhampton example found this way.

Be cautious about web sites (or firms) that say there is a myriad of unclaimed government grants out there and that then offer to find you one for a fee. Don’t pay until they get you the money!

There is no government grant available to everyone who wants to start a business. This is an urban myth.

The reality is that outside the arts, education and agriculture sectors grants to businesses in the UK are rare by international standards. Business here does not have a grants culture, but something a lot closer to a genuine enterprise one focused on customers.

In this culture grants have to be politically defensible. If a government body gives public money to one business, other businesses it competes will feel justified in complaining. So in the UK grants are not available across the board but only for purposes a minister, councillor or civil servant can defend.

So for example Nesta uses lottery money to encourage innovative and creative businesses. However, its grants are awarded on a competitive basis, and where large amounts are involved it usualy wants an equity stake - in other words partial ownership of the business.

In the UK the key source of revenue for businesses is overwhelmingly customers, during the start-up period as well as later. This after all is what distinguishes a business from a charity or public sector body.Businesses requiring more money to get going than early customers, friends, familly and the entrepreneurs’ own resources can provide have two other options.

They can seek a business loan from a bank or quasi-bank institution, or find an invester willing to put money into the business, usually in return for an equity stake.

Chasing for unlikely grants can be a distraction from putting together a strong offering that will prompt customers to voluntarily hand over money to you in return for your product or service.

Note also that your early customers will bring not just money when you most need it, but quite possibly also valuable information you can use to help guide your business. This feedback from real paying customers is something officials at a government agency or grant-giving charitable trust will be hard-pressed to match.

The printed paper version of PRIME’s brief guide to Working Tax Credit for the 2007 to 2008 financial year is now available.

You can still download the guide from here as a PDF, but if you would prefer a paper copy just email us your details and we’ll post you a free copy.

We are also distributing the 20-page booklet free to libraries, enterprise agencies and advice shops - so if you are one of those just email us your requirement.

Working Tax Credit is a kind of reverse income tax that you should get if your household income falls below a certain level. PRIME’s guide is written especially for self-employed people over the age of 50. It explains the scheme in only 20 pages and contains worked examples showing how much self-employed people in different circumstances would get.

More

Barclays Bank is running a programme of 19 free half-day business seminars around Britain, starting in late April 2007.

There are two types of seminar - about marketing and about improving profitability, both aimed at small businesses. More details on the relevant web pages on links above.

To book a place telephone Barclays on 0800 515 462 or 0845 601 0106.

Dates and locations

1. Lets Talk Bright Marketing, Pontypridd, 24th April 2007
2. Lets Talk Bright Marketing, Canary Wharf, London, 1st May
3. Lets Talk Bright Marketing, Milton Keynes, 2nd May
4. Lets Talk More Profit, Heathrow, 10th May
5. Lets Talk Bright Marketing, Taunton, 11th May
6. Lets Talk Bright Marketing, Truro, 16th May
7. ets Talk More Profit, Birmingham, 22nd May
8. Lets Talk Bright Marketing, Penrith, 23rd May
9. Lets Talk Bright Marketing, Oldham, Manchester, 24th May
10. Lets Talk Bright Marketing, Edinburgh, 5th June
11. Lets Talk More Profit, Newcastle, 6th June
12. Lets Talk More Profit, Leeds, 7th June
13. Lets Talk Bright Marketing, Colchester, 13th June
14. Lets Talk Bright Marketing, Southampton, 20th June
15. Lets Talk Bright Marketing, Worcester, 26th June
16. Lets Talk More Profit, Romford, 3rd July
17. Lets Talk More Profit, Canary Wharf, London, 4th July
18. Lets Talk More Profit, Newmarket, 5th July
19. Lets Talk More Profit, Worthing, 11th July

Tax changes announced in Gordon Brown’s March 2007 Budget will make little difference to most self-employed people this year, but herald a major shake-up starting April 2008.

The abolition next year of the 10 per cent income tax rate means that those on low incomes – which will include many engaged in starting a new business, may be worse off in financial year 2008 to 2009. That is unless they claim any tax credits due to them.

Growing role for tax credits 

A key message of the Budget lies not in the headline-grabbing changes to income tax rates, but in the growing role that working tax credit and child tax credit are playing in the personal tax system. PRIME believes it is more important than ever that self-employed people claim tax credits they are entitled to, otherwise they will lose out.

Here’s a summary of the major tax changes. Note that if you are a sole trader or a partner corporation tax is not relevant to you as you will still be taxed via the income tax system. If on the other hand you have decided to set your business up as a company then it has a separate identity. This means that as well as paying income tax as an individual on any dividends or salary you receive, the profits of your company are subject to corporation tax.

Few changes this year

There were no major surprises in personal taxation for this coming financial year (6 April 2007 to 5 April 2008), with tax rates and thresholds all as outlined in the Chancellor’s earlier pre-budget statement in December 2006. However, for small firms paying corporation tax on their company’s profits, the rate is going up immediately (from April 2007) from 19 per cent to 20 per cent. 

Big changes start in 2008

The major changes to personal taxation start in in April 2008, with both income tax and the tax credit system shaken up.

Income tax: The 10% starting rate for those on low incomes disappears, and the basic rate is cut from the present 22 per cent to 20 pence. This leaves a simpler structure of two just rates - the 20p in the pound basic rate and a 40p higher rate.

But you’ll go straight on to the 20 per cent rate as soon as your income exceeds your personal allowance. In 2008 the standard tax free allowance for those under 75 will be £8,990, up from £7,280 now.

Tax credits: This makes tax credits critically important. If you fail to claim them despite being eligible you are likely to be worse off if your income (or net profit) is under around £17,000.

 For an explanation of the way tax credits are calculated see PRIME’s free booklet. Tax credits are a kind of reverse income tax paid to those on low incomes - including the self-employed.

The good news for those qualifying for working tax credit is that you will be able to earn £1,200 more before you lose any of your entitlement. From April 2008 the income threshold for working tax credit calculations is increased from the present level of £5,220 to £6,420 per annum.

However the bad news is that once your income (or net profit) is over the threshold the amount of working tax credit you will get tapers off more quickly. From April 2008 the “withdrawal rate” on tax credits will be 39 per cent rather than the present 37 per cent, which means you will lose from your award 39p in the pound for every pound your income exceeds £6,420 per annum.

Child tax credit: Anyone who is eligible for working tax credit (WTC) who is caring for children under 16 is likely to also be eligible for child tax credit (CTC).

CTC is complicated but the amounts involved make it worth investigating, and the taper for CTC is much more gentle than for WTC. As your business income builds up you will lose WTC sooner than CTC. From April 2008 the value of the child element for each child rises to £2,080 a year.

Corporation tax: The Chancellor has decided to tax the profits of small company more and of large companies less, partly to reduce the incentive to set up lots of small phony companies.

For small companies the rate rises in one per cent steps over the next three years to 22 per cent by April 2009, starting immediately in April 2007 with a rise from 19 per cent to 20 per cent. Meanwhile the rate for large companies (profits of over £300,000 annually) will come down from the present 30 per cent.

But on the plus side small firms will be able to claim 100 per cent tax relief for new capital investment up to £50,000.

The High Street banks are by far and away the main source of start-up loans in the UK. But they won’t always lend to older people, particularly if you have a poor credit history or no collateral. So here we list some organisations that might be worth approaching if the banks have turned you down.

Most are CDFIs - non-profit organisations running a loan scheme to level the playing field for some particular group or to encourage business to set up in a particular area.

Q: What’s a CDFI?
A: A Community Development Finance Institution - a kind of small non-profit bank specifically set up to help those who cannot access money from mainstream banks and building societies. CDFIs in the UK are recognised in law and properly regulated. More from www.cdfa.org.uk

Coverage is patchy. CDFIs are relatively new in the UK and have not yet reached many parts of the country. Because CDFIs generally will only lend to those turned down by conventional banks they don’t compete with them, instead reaching out to customers the banks don’t serve. As a result the big banks generally don’t see CDFIs as rivals, and indeed have actively supported some CDFIs in getting established.

Typically the loans available from CDFIs are “loans of last resort”. You often have to have been turned down by a regular bank before you can apply. Interest rates are usually similar to those you would have to pay for a business loan from a conventional bank, but they do vary considerably - from a low of 3% to a high of around 30%.

Loans from even the most charitable CDFI are still loans that need to be paid back to keep the fund going - they are not grants. So the businesses people are proposing have to be sustainable and viable in exactly the same way as if you were approaching a commercial bank.

The CDFI will check out each application in businesses terms - indeed possibly more thoroughly than a conventional bank would, because the applicant usually isn’t putting up collateral such as a valuable house.

This makes getting a loan through schemes of this type generally slower than going to a bank. CDFIs are interested in whether the business will succeed, not just in how much your house can be sold for should it fail,

You can find a much longer list of CDFIs - many of them serving very specific geographic areas, from the CDFA, which is the sector’s umbrella body. Here we concentrate on an illustrative selection known to PRIME. Those indicated as PRIME partners have a specific commitment to helping the over 50s set up in business.

Aspire Micro Finance
Available in: Belfast, Newtownabbey, Mallusk, Lisburn and Derry/Londonderry areas of Northern Ireland. Aspire uses a micro-finance approach for deciding who to loan to, which means that it first lends small amounts to establish trust. If they are paid back on time you can apply for larger loans. Aspire prefers to deal with clients who are already trading, even if just in a small way.

Bristol Enterprise Development Fund
Available in: Bristol, Bath and the rest of the former county of Avon. Won’t lend to businesses involved in gambling, drinking, clairvoyancy or any activity which may offend public taste. Does do expansion loans for firms that have been trading for more than 12 months, as well as start-up loans.

Capitalise Business Support
Available in: Sussex including Brighton & Hove, and parts of South Kent. Capitalise is a subsidiary of Ten Sixty Six Enterprise Limited, the local enterprise agency for Hastings and a PRIME partner.

Read the rest of this entry »

1. Business Link
Business Link is a government-funded chain of advice shops located throughout England. Different arrangements apply in other parts of the UK.These government-backed agencies will generally also know about any public-sector grants for business, although these are much less common than many people believe - and often have strings attached.You can find your local Business Link from the link above. The web site also has a good section about the different options for financing a start-up business. For local sources of start-up finance, including CDFIs operating in your area, Business Links are also worth contacting.

2. Business Eye
The equivalent of Business Link in Wales. You can find your nearest office from the map on the link above.

3. Business Gateway
Government-funded business advice network for Scotland. The link above explains the sorts of finance, loans - and sometimes even grants, available in Scotland. The banking laws are different in Scotland, so many schemes operating in England aren’t available north of the border. For more on Scottish business support see here

4. Northern Ireland
A free Start a Business Service is available right across Northern Ireland. It includes help with finding finance.

If you are running a web site - or even just sending business emails, new rules require you to say who exactly you are. The sort of information required is similar to that already required for letterheads and invoices - full business address, registration number, VAT number etc., so the requirements are not too onerous. The rules apply to all limited companies and limited liability partnerships and came into effect on the 1st of January 2007.

More from law firm Pinsent Masons

Age Positive has published a league table of 149 towns, cities and counties in England ranked by how well they are doing at providing jobs for older people. Slough is best, with 73.9 per cent of 50 to 69 year olds in employment, and Hartlepool the worst with only 31.8 per cent. The bottom 10 are:

Tower Hamlets : 42.9

South Tyneside : 42.9

Isle of Wight : 42.9

Redcar and Cleveland : 42.3

Sunderland : 41.5

Salford : 40.5

Hackney : 37.9

Knowsley : 37.0

Liverpool : 36.6

Hartlepool : 31.8

In a major overhaul of the UK welfare system Incapacity Benefit (IB) is due to be replaced by 2008 and an extra one million people over 50 eventually got back into employment. That’s the government plan anyway - but will it work?

At the moment 2.7 million people claim IB - about half over the age of 50. “After two years on the benefit, someone is more likely to die or retire than to ever find a new job. That is just not good enough,” welfare secretary John Hutton said recently.

Frustration with the low prospects of ever finding a job with a regular employer is a major factor driving many workless people to set up their own businesses. There is some state help to ease the transition in some regions under existing schemes. But it’s not yet clear whether the new plans will do much to improve the route off welfare into self-employment.