Sunday, 10 November 2013

What will you do with your £2,000?

What would you do if your business received a windfall of £2,000?

That's £2,000 guaranteed extra income received between April 2014 and March 2015. That would be nice I hear you say, but who is going to give us that? Well, unlikely as it may sound HM Revenue & Customs is the generous benefactor and the funds will be distributed by means of a NIC Employment Allowance in the coming tax year.
Under the scheme, Businesses, Charities and Community Amateur Sports Clubs will be able to reduce their Employer Class 1 NICs bill by up to £2,000 per year. More details of the scheme will be announced in the new year including how to claim the allowance. 

The most likely method of implementation is to allow employers to reduce their monthy or quarterly NIC payments from next April until the full £2,000 allowance has been claimed. So businesses who do not pay NIC of £2,000 or more are unlikely to be eligible for the allowance. Nevertheless, many small and micro businesses should qualify for the allowance and can start to consider soon how they will use their windfall.

One thought is you could just build it into your financial forecasts and make no special decision relating to the £2,000. Essentially it's just reduction in your PAYE forecast for 2014-15 and you plan accordingly. That's fine but I like the idea of making a specific choice or investment decision as a result of the windfall. If you think of a similar event in a domestic context - let's say you win £2,000 on a scratch card or receive a gift from a generous relative, do you lob it in the pot to reduce your overdraft or spend it on something special? I think for many people it would be the latter.

So here are some ideas for what you could do with your business windfall:

  • Give deserving employees a bonus or pay rise
  • Take on an apprentice 
  • Take on a graduate for a specific project
  • Invest in an employee outing - a night out, day at the races etc
  • Invest in a new asset or assets - could be a deposit for hire purchase
  • Invest in office or business premises refurbishment
  • Invest in marketing initiatives 
  • Build or refresh your website
  • Take a stand at an exhibition
  • Take on a business mentor for the year

These are all small things which could make a difference to your business next year. £2,000 could help you decide to take the plunge.

So my advice is start to think about this now and make your plans. When the chancellor comes along with his bag of cash next year you will then be ready to act and move your business forward.

Now wouldn't it be nice if it was an annual allowance...