Archives October 2024

Companies House Transition Plan: New Economic Crime Act


 

The Economic Crime and Corporate Transparency Act (2023) will bring about some of the most substantial changes to company law since 1844. Its main goal is to make business practices more transparent and tackle financial crime more effectively.  

So, what does this mean for small and large businesses? Let’s break down the key points and what you need to know to stay ahead.  

A Stronger Role for Companies House  

Companies House has always played a key role in maintaining company records, but the new legislation gives it far more power. In the past, it acted more as a passive record-keeper, checking that documents were filed and available to the public. Now, it’s shifting to a much more proactive role. Companies House will actively make sure that the information it holds is accurate, trustworthy, and up to date. It will also have the power to prevent companies from being used for unlawful activities such as money laundering and fraud.   

Key Changes for Businesses  

The new Act presents some of the following important changes that will affect the operation of businesses in the UK. Here’s a closer look at what you need to know:  

  1. Identity Verification 

One of the biggest changes is that company directors, people with significant control (PSCs), and anyone submitting filings on behalf of a company will now have to verify their identity. This means no more anonymous registrations. If you’re involved in running or managing a business, you’ll need to prove who you are. It’s a straightforward step but an important one, helping to make the system more accountable and transparent for everyone.  

  1. Increased Data Sharing and Enforcement Powers 

Companies House will also be able to improve investigation by sharing information with law enforcement agencies. If something looks suspicious in a company’s filing, it can be flagged, questioned, and even rejected. This added scrutiny is crucial for preventing companies from being used for illegal activities like fraud or money laundering.  

  1. Changes for Limited Partnerships (LPs) 

By spring 2026, limited partnerships (LPs) will also be subject to new transparency rules. In the past, LPs have sometimes been used to conceal ownership or shady activities. Under the new regulations, LPs will need to be more upfront about who owns and manages them. This shift will align them with other types of businesses, ensuring a consistent level of transparency and accountability.  

Timeline for the Changes  

These changes aren’t happening overnight. The government is phasing them in over the next few years, giving businesses time to adapt. Here’s a brief overview of when you can expect the key reforms to come into play:  

  • March 2024: Companies House began using its new powers to query filings and remove suspicious or incorrect information. 
  • Spring 2025: The first wave of identity verification starts, initially focusing on Trust and Company Service Providers (TCSPs). 
  • Autumn 2025: Identity verification becomes mandatory for new company incorporations, with a 12-month window for existing companies to comply. 
  • Spring 2026: Further reforms, including changes for limited partnerships, will come into effect. 

 You can visit the  Companies House for more information. 

What Should You Do to Prepare?  

For most businesses, these changes won’t cause too much disruption, provided you follow the rules. The main thing to focus on is ensuring your company’s information is accurate and up to date and that all directors and PSCs verify their identities.  

It is a good idea to start reviewing your filings now instead of waiting until the last minute. If companies ignore these changes or don’t follow the new rules, they could face penalties. On the bright side, adopting these changes early shows you are serious about transparency and good governance, which will help boost your reputation with clients and investors. 

iXBRL Tagging

If you are looking for support with converting your financial statements into iXBRL, the team at DataTracks is here to help. You can contact them at +44 (0) 203 608 8035 or via email at [email protected].



Finance

Challenge and Opportunity: how to succeed in the 2025 Commercial Real Estate Market


Borrowers can get an edge by appealing to lenders – particularly when the market is getting competitive

Are you wondering where the opportunities are in the 2025 commercial or buy-to-let mortgage market? Let’s take a look.

New lending for commercial real estate plummeted by 33 percent last year to the lowest point since 2013. For small and medium-sized enterprises (SMEs) in the UK, this means they may struggle to secure the finance needed to grow – meaning businesses could miss out on key growth opportunities.

Ed Brown, the Commercial Mortgages Funding Specialist at Swoop, says that the property market has been tough on SMEs: 

“2023 was a low point for the market in respect of new lending and transactions. Partly thanks to high commercial mortgage interest rates, there was a decline in appetite with development lending accounting for only 16 percent of all new lending.”

The impact of this was that buy-to-let (BTL) house purchase lending fell by 53 percent in 2023. Ed believes that the interest rate drop in mid-2024 was a key turning point for the market:

” Short-term interest rates are trending lower and gross lending was around £4 billion during Q2 in 2024, suggesting a more stable market. This will lead to an increase in the future.”

The interest rates have been lowered by the Bank of England because of slowing inflation and signs of economic stagnation; lowering commercial mortgage interest rates will result in economic growth by increasing investment in businesses and boosting gross domestic product (GDP).

A report by Bayes Business School, (formerly Cass) says that 42 per cent of the £170 billion of loans outstanding will have to be refinanced within 12 months. Ed says that this presents a significant opportunity for businesses with existing commercial mortgages: 

“Refinancing a loan can mean lower monthly payments and free up money to use for growth. That said, down valuations, cover ratios, EPC ratings, lender appetite and vacancies are making this a challenging market.”

Key factors to strengthen your application to lenders

There are a number of levers business owners can pull (or influence) to increase their chances of securing a loan. Here are three:

Down valuations – if a property is worth less than its original valuation, a lender will be less willing to loan against the higher figure. One way buildings lose value is through poor maintenance so ensure that your property is looked after.

Interest cover ratios – lenders use these to see the risk of lending their money to a company; it is therefore important for a business to demonstrate they are low risk. You should keep a close eye on your business costs, drive efficiency and show strong cash flow. 


Energy Performance Certificates (EPC ratings)
– those with a better rating will have lower fuel bills, which means a better cash flow, appealing to lenders.

Conclusion

Lender appetite can vary because of factors outside a business’s control. By showing stability, low risk and strong cash flow, a business can put themselves in a good position to search the market for the funding they need. By putting yourself in the lender’s place, you can see your businesses through their eyes, and give yourself a better chance to secure the funding you seek.

If you are considering a commercial buy-to-let mortgage, buying a commercial property or have an outstanding commercial mortgage, get in touch with Ed and his team – and they’ll help to evaluate if you’re getting the best rates and terms.



Finance

Business loan applications: What do you need?


Ian Hawkins

Head of Content

Ian Hawkins is Head of Content at Swoop. As a freelance business journalist and filmmaker he has reported from Europe, Central and North America and Africa. His films and writing have appeared on BBC World, Reuters and CBS, and he has spoken at conferences on both sides of the Atlantic on subjects including data, cyber security, and entrepreneurialism.



Finance

Should you avoid business loans that require personal guarantees?


Small business owners need to gauge their risk appetite carefully before they agree to funding that puts their personal assets on the line

Personal guarantees are a common requirement for small business loans, but many entrepreneurs may not fully understand the risks involved. A personal guarantee means that you’re personally liable for the loan if your business fails to repay it. This can put your personal assets at risk, including your home, car and savings.

According to a recent survey by Purbeck Insurance, 13 percent of small business owners have backed out of a loan due to the demand for a personal guarantee, and we can assume that those who do sign a personal guarantee may do so with misgivings, or believing that they have little alternative. One factor that can change attitudes is insurance to protect against the risk. In the same survey, 46 percent of respondents said they would be more likely to sign a personal guarantee if they had insurance.

Despite the risks, personal guarantees can be a valuable tool for small business owners seeking funding. By understanding the implications and considering insurance options, you can make informed decisions about your financing needs and protect your personal assets.

Insurance protection for personal guarantees

If you are not comfortable with the risks of borrowing money against a personal guarantee, there are insurance options available to protect small business owners’ assets. Personal Guarantee Insurance (PGI) can provide coverage for the full amount of the loan, protecting your personal assets in case of default.

Alternative borrowing

How you borrow to fund your business may come down to more than cost: if your risk appetite is low, you may prefer to avoid personal guarantees all together and pay a higher interest rate. At Swoop, we make it easy to compare different deals so that you can choose the one that is right for you and your business needs. 

The bottom line

Personal guarantees can be a risky proposition for small business owners. Options for business owners include insurance to protect your personal assets or seeking alternative borrowing options.

Swoop is a business funding and savings platform enabling businesses to discover the right funding solutions across loans, equity and grants, and to identify and easily make savings – all in one fell swoop.

Swoop works with over 1,000 funding providers from mainstream banks, alternative lenders, venture capital funds, angel investors and grant agencies, meaning that whatever your funding requirement, Swoop has a solution that fits.



Finance

Top 19 Tax Deductions to Lower Your Business Taxes in 2024


Tax season can be daunting, especially for small business owners. However, knowledge of the permissible tax deductions can help them minimise their taxable income and improve their financial position. A business tax deduction is an expense that can be subtracted from revenue for the calculation of taxable business income. The following blog discusses 19 key deductions to consider in 2024:

Employees’ Salaries, Wages, and Commissions

Businesses can deduct payments made to employees in the form of salaries, wages, commissions, etc., where such expenditures are reasonable, necessary, and for services actually rendered. Sole proprietors, partners, or LLC members are not considered employees. However, S-corp owners must pay themselves a reasonable salary comparable to that of non-owner employees.

Bad Debts

It is acceptable to deduct bad debts if an attempt was made to collect them, the amount was included in the income before, or the debt was loaned out as cash. However, the debt should be incurred for business purposes, not personal reasons.

 Rent

Monthly rent payments for business property are allowed deductions for the year they are made. However, receipts of rent made in advance can only be accounted for the period within the taxable year.

For example, if a business paid $90000 as rent for November, December, and January, and the financial year ends on the 31st of December, then it would be allowed to write off $60000 for the current year (2 months x $30,000 each). The $30,000 spent for January is tax deductible in the following year.

The amount of rent must not exceed the market value.

Business Licenses

Certain licenses, such as general, health, alcohol, zoning, and environmental permits, are allowed deductions when calculating the business’s taxable income. These licenses are usually necessary in cases when certain legal activities are to be carried out in particular states or fields.

Taxes

The following are the types of deductible taxes:

  • State and local income taxes
  • Foreign income taxes
  • Payroll taxes (like Social Security, Medicare, and unemployment taxes)
  • Property taxes on business assets
  • Excise taxes

 Interest

All interest on business loans, such as those borrowed from credit card companies, are deductible provided they are solely used for business activities. The business must establish a “debtor/creditor” relationship with the lender, and the loan must be expected to be repaid. Usually, interest could not exceed 30% of the company’s earnings.

Depreciation

Depreciation enables businesses to allocate the cost of acquiring fixed assets like furniture and buildings over their useful life. Methods like bonus depreciation (60% in 2024) and Section 179 expensing, which has a limit of $1,220,000 for 2024, can help businesses to expense a significant portion of these costs in the first year.

 Advertising and Promotion

In most cases, companies can claim advertising expense, cost of social media marketing campaign, and printing business card expense as tax deductions. Expenses that build goodwill in the community also qualify, although some judgements may be required to determine their eligibility.

Please Note: Expenses paid to finance political events or to influence legislation are non-deductible because these are not considered advertising.

Insurance

Deductible expenses also include insurance premiums for property, liability, cybersecurity, medical, and workers’ compensation. Certain policies, like life insurance, are only allowed for deduction if the business is not a beneficiary of the policy.

 Start-Up Costs

This includes expenditure on market research, promotional activities for the business opening, and wages for trainee employees. The business can deduct up to $5,000 on start-up costs if the total expenses incurred across the first year are less than $50,000. Any other expense over $50,000 reduces the deductible amount on a dollar-for-dollar basis. The remaining costs may be amortised over 180 months.

 Travel and Meals

These include fares for business-related travel and accommodation. Meals that are considered part of the employee benefits or included in company-wide parties are 100% tax-deductible. Any meal taken while on a business trip or meeting a client can be claimed as a deduction of up to 50%. However, expenses for entertainment, such as a concert ticket, are non-deductible.

Vehicle Expenses

These expenses can be claimed under the actual expense method, where taxpayers can claim every cost or the standard mileage rate, which is 67 cents per mile for the year 2024. Companies should select the method that provides the highest tax advantage.

 Credit Card Processing Fees

Expenses incurred to process credit card payments, including fees, are permitted to be claimed as a business expense, mitigating the costs of accepting the cards.

 Certain Education Expenses

Any expense that increases or maintains an employee’s skill level can be deducted. However, any expenses incurred to ensure that an employee is qualified in a new trade or career are not allowed for deduction. Other deductible education-related expenses include workshops, webinars, textbooks, and seminars.

Legal and Professional Fees

Fees paid to lawyers, accountants, bookkeepers, and other specialists are permitted deductions if the expenses were incurred for business purposes. This includes charges for services such as filing taxes, legal matters, and marketing services.

 Certain Repairs and Maintenance

Repair and maintenance costs for vehicles, furniture, and equipment are 100% tax deductible. However, expenditures that bring a material increase in the property’s capacity, productivity, or quality are regarded as improvements, which are not immediately deductible. These are added to the original cost of the property, and then they are depreciated.

Telephone and Internet

Expenses on telephone bills and Internet connections used for business activities are tax-deductible. However, if these services are used for both business and personal use, only the business half can be claimed as a deduction.

Software and Subscriptions

Subscriptions to software and other technologies used in the business can be claimed as tax deductions. Examples of business software include project management software, accounting and bookkeeping software, and customer relationship management software.

 Membership Dues

Subscriptions/memberships paid to professional or business organisations are reduced, provided they are not paid for entertainment. New subscriptions to trade journals and professional publications are also eligible.

Conclusion

For more information about tax deductions, you can visit the HMRC website. If you are looking for the best-in-class iXBRL services in the UK, consult DataTracks at +44 (0) 203 608 8035 or email [email protected]. 

 



Finance