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Month: November 2024

What is a Validation Order (And What Does It Have To Do With a Winding Up Petition)?

Written by admin on . Posted in Bankruptcy, Company Insolvency, Insolvency, Restructuring & Insolvency. No Comments on What is a Validation Order (And What Does It Have To Do With a Winding Up Petition)?

The word ‘Validation’ means different things depending on its usage. The dictionary lists: ‘acceptance’, ‘affirmation’, ‘authorisation’, ‘corroboration’, endorsement, proof, ‘recognition’, ‘verification’.

In the context of insolvency (both bankruptcy and company),  a validation order is a special court order that allows a company to continue using its bank account or carry out specific transactions after a winding up petition has been issued against it.

A winding up petition is a legal step taken by creditors who believe that a company is unable to pay its debts. If granted by the court, the petition can lead to the company’s closure (also known as liquidation), and its assets sold to repay creditors.

Once a winding up petition is filed, the company’s bank accounts are usually frozen to protect the creditors’ interests. However, this can severely disrupt the company’s ability to operate, even if it plans to challenge the petition. This is where a validation order becomes essential.

A validation order allows the company to continue certain financial activities—like paying employees or making crucial payments—while the petition is being dealt with.

Consequences of Advertising a Winding Up Petition in the London Gazette

When a winding up petition is advertised in the London Gazette, it becomes public knowledge. This can have serious consequences for the company:

  • Frozen Bank Accounts: Once the petition is advertised, banks often freeze the company’s accounts to prevent money from being moved around.
  • Damaged Reputation: The advertisement can harm the company’s reputation, scaring away customers, suppliers, and investors.
  • Increased Pressure from Creditors: Other creditors may join in to demand payment, increasing the financial strain on the company.

To prevent these issues, a company can apply for a validation order, which could unfreeze accounts and keep essential parts of the business running.

Need Help with a Winding Up Petition?

If your company has received a winding up petition, it’s important to act quickly. Contact Femi Ogunshakin to discuss how to apply for a validation order from the insolvency courts. Femi offers a free 30-minute consultation to help you explore your options and protect your business. Reach out on 07867 795 439 or email femi@femiogunshakin.com or femi.ogunshakin@nexa.law

Photo by Mathew Schwartz on Unsplash

Employment expenses pushed to paper

Written by admin on . Posted in Employment Tax, PAYE, self-assessment. No Comments on Employment expenses pushed to paper

Despite its digital ambitions, HMRC has recently reverted to paper-based claims for employees who want to make a claim for employment expenses. The change from an online basis has been made to reduce fraud.

Reports suggest that businesses are claiming expenses even when there is little, or no, business relevance in an attempt to counteract increasingly onerous tax burdens. Given HMRC’s move to paper-based claims for employment expenses, it seems as if some employees may have adopted a similar attitude. Tax refund companies have also misused the expenses system in order to obtain inflated tax repayments.

Form P87

Employees can claim tax relief for expenses through PAYE if they have not been reimbursed by their employer. From 14 October this year, claims must be made using a paper form P87 which is then posted to HMRC. Claims have to be supported by appropriate evidence. For example:

  • Professional subscriptions: receipt copy showing how much was paid.
  • Mileage allowance: mileage log copy, giving the reason for each journey; with start and finish points.
  • Subsistence: hotel or restaurant receipts copies.
  • Working from home: proof that an employee is required to work from home, such as a copy of the employment contract. An employee who simply chooses to work from home is not eligible for a claim.

Despite the change, online claims can still be made for flat rate expenses (uniform, work clothing and tools). HMRC expects the digital claim route to be available again from next April.

Self-assessment

An alternative to claiming via PAYE is to claim for employment expenses when submitting a self-assessment tax return. If employment expenses for the year exceed £2,500, this is the only permitted route.

Although there is no initial requirement to provide evidence when claiming employment expenses this way, HMRC will be extending the number of compliance checks on the eligibility of expense claims made. In such cases, they may request further evidence.

HMRC guidance on claiming tax relief for employment expenses can be found here.

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Business rates worth the relief?

Written by admin on . Posted in Budget, Business Rates. No Comments on Business rates worth the relief?

Business rates relief has been extended for the retail, hospitality and leisure sector but, with the rate of discount cut from 75% to 40%, many English businesses will face a near doubling of their rates bill for 2025/26.

Next year’s changes for 2025/26

Retail, hospitality and leisure properties not qualifying for small business rates relief currently receive a 75% business rates discount, subject to a cap of £110,000 per business. This relief is to continue for 2025/26, but with the rate of discount cut to 40%:

  • A business rates bill consists of a property’s rateable value multiplied by a multiplier.
  • For 2025/26, the small business multiplier (rateable value below £51,000) is again frozen at 49.9p. This covers over a million properties in England.
  • The standard multiplier (rateable value £51,000 or more) is being uprated from 54.6p to 55.5p.

On the one hand, businesses will be relieved that the business rates discount will not cease altogether on 31 March 2025. However, on the other, they will be disappointed with the level of replacement discount.

Property will typically qualify for the 40% discount if the business is mainly being used as a shop; restaurant, café, bar or pub; cinema or music venue; or gym, spa or hotel.

2026/27 onwards

With the aim of implementing a fairer system of business rates, permanently lower multipliers will be introduced for retail, hospitality and leisure properties with a rateable value below £500,000:

  • This reduction will be funded by a new higher multiplier for properties with a rateable value of £500,000 or higher.
  • The higher multiplier will include most large distribution warehouses, including those used by online retailers.

The Government will also be consulting on other areas for reform. For example, where the presence of cliff-edges in the system acts as a disincentive to expand.

There are currently no details yet of any discounts for property in Scotland, Wales or Northern Ireland, nor have multipliers been announced. Welsh retail, hospitality and leisure property currently benefits from a 40% discount.

Details of the business rates reliefs currently available in England can be found here.

Photo by Aarón Blanco Tejedor on Unsplash

What is a Winding Up Petition?

Written by admin on . Posted in Bankruptcy, Company Insolvency, Insolvency, Restructuring & Insolvency. No Comments on What is a Winding Up Petition?

A winding up petition is legal action taken by a creditor ie HM Revenue and Customs (HMRC) to force a company into closure because it cannot pay its debts.

Essentially, a winding up petition is a request to the court to wind up (or close) the company so its assets can be sold off to repay the money owed. If granted, the company may be placed in compulsory liquidation, meaning it will cease trading, and the creditors will receive payment from the sale of its assets.

How to Avoid a Winding Up Petition

Receiving a winding up petition can be very serious for any business, but there are steps you can take to avoid it:

  1. Pay your bills on time – Ensure that you manage your cash flow well and make regular payments to creditors. This shows that your company is financially healthy.
  2. Communicate with creditors – If you’re struggling to make payments, talk to your creditors. Many creditors are open to discussing repayment plans or negotiating terms rather than going to court. If you’re lucky, you might even get a time to pay arrangement agreed!
  3. Seek professional advice early – If your business is in financial difficulty, it’s important to get expert advice as soon as possible. They can help you restructure debts or explore other options to avoid legal action.
  4. Keep accurate financial records – Monitoring your company’s financial health is crucial. Regularly review your accounts and keep up-to-date records to spot any potential cash flow issues before they become serious.

Free Consultation

If your company is facing financial difficulties or you’re concerned about the possibility of a winding up petition, it’s important to seek advice quickly. Contact me for a free 30-minute consultation to discuss your situation and explore possible solutions. You can reach me on 07867 795 439 or email either femi@femiogunshakin.com or femi.ogunshakin@nexa.law

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HMRC and Time to Pay Arrangements: What You Need to Know

Written by admin on . Posted in Bankruptcy, Company Insolvency, Director Disqualification, Insolvency. No Comments on HMRC and Time to Pay Arrangements: What You Need to Know

HMRC and Time to Pay Arrangements: What You Need to Know

When facing financial difficulties, paying taxes on time can be a challenge for individuals, partnerships, and companies alike. On a discretionary basis, His Majesty’s Revenue and Customs (HMRC) may be willing to offer a  Time to Pay Arrangement (TTP); a flexible solution that allows taxpayers to spread the cost of their tax debts over an extended period. These arrangements are typically agreed upon if HMRC is satisfied that the taxpayer is genuinely unable to pay the full amount immediately but can settle the debt in instalments.

Why Time to Pay Arrangements Are Useful

A TTP agreement helps alleviate the immediate pressure of a tax bill and avoids severe enforcement actions like penalties or interest charges, which could further strain finances. Whether it’s personal income tax, VAT, PAYE, or Corporation Tax, these arrangements offer breathing space for managing cash flow while staying compliant with your tax obligations. HMRC generally expects businesses or individuals to proactively engage with them before defaulting, and they usually respond positively to reasonable requests for payment plans.

Pitfalls of Not Keeping to the Agreement

Failing to adhere to the terms of a TTP arrangement can have serious consequences. If payments are missed, or HMRC believes the business is no longer able to meet the terms, the arrangement can be terminated. HMRC will then escalate recovery measures, which may include legal proceedings.

HMRC’s Escalation Procedures

Once a taxpayer defaults, HMRC will typically send reminders, followed by more formal actions if the debt remains unpaid. This can include:

  • Issuing a statutory demand: A formal request for payment within 21 days.
  • Commencing legal proceedings: HMRC may seek a court judgment for the debt, which could lead to seizure of assets or garnishing of income.
  • Winding up petitions: For companies, failure to resolve tax debts may result in HMRC applying to the court to wind up the business, forcing it into liquidation.

Avoiding Legal Action

It’s crucial to negotiate with HMRC if you foresee any problems with adhering to your TTP agreement. Having professional assistance ensures you make a reasonable case to HMRC and avoid unnecessary legal complications.

Whether you’re an individual, partnership, or limited company, we can help with finding a resolution to your tax debt issues and assist with negotiating a Time to Pay Arrangement with HMRC. For expert advice and assistance, contact Femi Ogunshakin on 07867 795 439 or via email at either femi@femiogunshakin.com or femi.ogunshakin@nexa.law

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EPC upgrade work

Written by admin on . Posted in Landlord, Leasehold, Property. No Comments on EPC upgrade work

Rental property has been set a government target to meet an energy performance certificate (EPC) rating of C by 2030. Although new funding in support of this initiative has been announced, the grants will not help all landlords.

Around a third of rental properties were built before 1919, many with solid walls. Such property will be particularly difficult to bring up to an EPC C rating. From 2030, it will not be possible to legally rent out a property without such a rating.

Grant conditions

From 1 April 2025, a grant of up to £30,000 will be available for a landlord to improve their first rental property. This funding will be capped at £15,000 for energy performance upgrades and £15,000 for low carbon heating:

  • For second and subsequent properties, the overall grant will be capped at £15,000, with the landlord having to contribute a corresponding amount (or more).
  • If a property is situated within an eligible postcode area, it will automatically qualify for a grant. Around half of England’s postcode areas qualify, selected on deprivation factors.
  • Other properties will qualify if rented to tenants who receive certain means-tested benefits (such as universal credit or housing benefit), or the tenants’ annual gross income is less than £36,000.

There is no limit on the number of properties for which a landlord can claim grants, but the overall maximum funding per landlord will be £315,000.

Properties will only qualify for a grant if they have an EPC rating between D and G. After upgrading, a property should reach a C rating wherever possible.

Upgrades

Upgrades include:

  • Low carbon heating: Clean heat measures such as heat pumps or high retention storage heaters. Older properties may, however, be unsuited to heat pumps, and the current method of calculating EPCs could result in a lower rating if a heat pump is installed.
  • Energy performance upgrades: Measures such as double/triple glazing, insulation, draughtproofing, solar panels and smart heating controls.

A detailed explanation of the available grants can be found here.

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Double hit for employers

Written by admin on . Posted in Employment Tax, National Insurance Contributions, National Living Wage, National Minimum Wage. No Comments on Double hit for employers

The October Budget was not particularly kind to employers, with the cost of employer national insurance contributions (NICs) going up substantially from April 2025, combined with inflation-busting increases to the National Living/Minimum Wage.

Employer NICs

From 6 April 2025, the rate of employer NICs will increase from 13.8% to 15%, and the starting annual threshold will be lower at £5,000 (it is currently £9,100). For example, for someone employed on £50,000 per annum, the employer NIC cost will be just over £1,100 higher for 2025/26:

  • The increased 15% rate will also hit employers if they provide taxable benefits, such as medical cover, to employees.
  • The £5,000 threshold will stay in place until 5 April 2028. The threshold reduction will have a disproportionate impact on employers with a large number of low earners.

On the plus side – especially for smaller employers – the employment allowance is being increased from £5,000 to £10,500. Currently, this allowance is not available where employer NICs were £100,000 or more in the previous tax year. This restriction will be removed.

Although four full-time workers on the National Living Wage can be employed without any NIC cost for the employer, the changes are likely to see employers being increasingly careful with their recruitment policies.

National Minimum/Living Wage

Minimum wage rates will see substantial increases from 1 April 2025, with younger workers and apprentices benefiting the most:

  • For those aged over 21 and over, the hourly rate will go up by 6.7% to £12.21.
  • For 18- to 20-year-olds, there is a 16.3% increase to £10.00.
  • For apprentices and those under 18, the increase to £7.55 represents an 18% hike.

This follows similarly high increases in April 2024. Employees will welcome the uplift, but many employers will struggle with the additional cost; especially those in the hospitality sector. For full-time employees aged 21 and over, the increase is worth £1,400 a year. For 18- to 20-year-olds, the annual benefit is potentially worth over £2,500.

The rates of National Minimum/Living Wage can be found here.

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The Autumn Budget – a brave new tax world

Written by admin on . Posted in Budget, Capital Gains Tax, Corporation Tax, Income Tax, Inheritance Tax, National Insurance Contributions. No Comments on The Autumn Budget – a brave new tax world

Chancellor Rachel Reeves’ first Budget was a significant one in all senses.

“…this Budget delivers a large, sustained increase in spending, taxation, and borrowing.”

So said the Office for Budget Responsibility (OBR) in the first paragraph of its overview of the Autumn Budget. The numbers are indeed large:

  • spending is up by almost £70 billion a year over the next five years;
  • taxation will rise by £36 billion a year; and
  • borrowing will still be above £70 billion a year in 2029/30.

The Chancellor’s tax-raising opportunities were constrained by the Labour manifesto pledges to hold the rates of income tax, VAT, corporation tax and national insurance contributions (NICs) – only for employees, although other interpretations are available. The result was that other taxes had to carry the burden of providing extra funds for the Treasury:

  • Over half the additional revenue came from changes to employer’s NICs from 2025/26. These saw the class 1 employer rate rise from 13.8% to 15.0%, and the starting point for payments fall from £9,100 of annual earnings to £5,000. The impact of this was mitigated slightly by a £5,500 increase to £10,500 in the employment allowance – effectively an employer NIC credit.
  • The main capital gains tax rates have increased from 10% to 18% (for non-taxpayers and basic rate taxpayers) and from 20% to 24% (for higher and additional rate taxpayers). The rate for business assets disposal relief will rise from 10% to 14% in 2025/26 and then 18% in the following tax year, with the maximum amount of lifetime relievable gain staying at £1 million.
  • Inheritance tax (IHT) relief for businesses and agricultural property will be cut back from April 2026, with the relief for qualifying shares listed on the Alternative Investment Market halved to 50%.
  • Death benefits from pensions will be brought into IHT from 2027/28, although there were none of the other tax changes that had been rumoured in the weeks before the Budget. Notably full income tax relief on contributions remains and employer contributions continue to be free of NICs.

If you could be affected by any of these changes (or further changes not mentioned in this update), make sure that you seek advice. The sooner you are prepared for this new, higher tax environment, the better.

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First aid for ailing businesses: let us help you!

Written by admin on . Posted in Bankruptcy, Insolvency, Winding Up Petitions. No Comments on First aid for ailing businesses: let us help you!

Sadly, no matter where we are in the economic cycle, there are businesses which find themselves in distress.

Given higher interest rates, increasing costs all round, not to mention the ever-increasing tax burden, it’s not surprising that the insolvency rate for businesses is also going up.

Owners, directors and investors may be worried about the financial health of their businesses and be considering their options.

Sharing our knowledge

Over the next few weeks, I will be publishing a series of short, practical blogs on insolvency related topics, including the effects of debt/insolvency on companies (and/or individuals) struggling to meet their financial commitments.

Read our blogs

Among other useful articles, you can read my blogs on what a winding-up petition is (and how to avoid one) and why a validation order might save your business (by unfreezing bank accounts and keeping essential parts of the business running) on my website.

Book your free consultation

I’m currently offering a free 30-minute consultation to help you explore your options and protect your business. The earlier you seek professional advice for your business, the more options you have.

So don’t delay, reach out to me today by calling 07867 795 439 or emailing me at either: femi@femiogunshakin.com or femi.ogunshakin@nexa.law 

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