< Previous20 East Midlands Business Link www.eastmidlandsbusinesslink.co.uk TAX Has your business made changes to its trading activities during the pandemic? By Jennie Brown, Tax Partner at Streets Chartered Accountants Many businesses have been adversely impacted by the pandemic and in order to survive, they have had to adapt and, in some cases, diversify their offering. During a time of challenge, positive news stories of businesses who have made changes and have been able to spot opportunities have been welcomed, showing much innovation and inspiration to others. Whilst this is commendable, as always, such businesses need to understand the impact of this change in terms of the accounting and taxation rules. This article highlights why the nature of trade is important and other associated areas that businesses may be facing during this time, such as new types of income and expenditure. Why is the nature of trade important? When a business starts carrying out an entirely new trade, completely unrelated to its previous activities, then this should normally be treated as the commencement of a separate trade. If a business starts carrying out a new activity that is broadly similar to its existing trade, then this should not be treated as the commencement of a separate trade. Its profits and losses in this case can be merged together with the existing trade. An example within the HMRC manual explains this as follows: If a restaurant business starts manufacturing gowns and face masks, then this should be treated as the commencement of a separate trade. to a total of £1,000. Revenue expenditure Some businesses may incur different expenditure during this time than they have before. An important point to note here is the rules outline for expenses to be tax deductible - they must have been incurred wholly and exclusively for the purposes of a trade. Expenditure that provides an incidental non-trade benefit are not disallowed so long as the purpose of the expenditure was to benefit the trade, provided the facts do not show that achieving the non-trade benefit was a purpose in incurring the expenditure, if they did then the expense would be disallowed. If an identifiable part or proportion of the expenditure can be identified as incurred wholly and exclusively for the purposes of the trade, that part or proportion is not disallowed. In addition, where a business makes donations of goods and services, they should consider the impact on the taxable trade profits. While the cost of gifts and donations is generally disallowable, there are provisions which allow particular donations. Also, gifts of trading stock may not always result in a taxable receipt. During the pandemic businesses may be making refunds, such as gym memberships, and these amounts should be allowed as expenses within the accounts. There are a whole host of different types of expenditure to consider, from small gifts, donations and foregone profit and refunds, and businesses should ensure they understand whether they will qualify for an allowable deduction or not. However, if a business that is already manufacturing clothing articles starts to manufacture gowns and face masks using the same staff and premises then this should be treated as an extension of the same trade and not the commencement of a new trade. Temporary breaks in trading activity Temporary breaks in trading activity do not amount to a permanent cessation of the trade for tax purposes. For example, if a business closed its doors to customers, or otherwise ceased trading during the Coronavirus lockdown period, but intended to continue trading after restrictions were lifted, then the trade should not be treated as having ceased. This is on the basis the activities following the break are the same or similar to those prior to the break. Any income and expenses relating to the gap would need to be reviewed as to whether they related to a new trade or an extension of the same trade. Where a business does not recommence after an originally intended temporary break, the facts would need to be reviewed to determine when the business actually ceased. Income received Some businesses may have sought donations of money to be able to supply products or services to the value of the donations received. Receipts intended to meet revenue expenditure or to supplement trade income, are trade receipts. Income of a casual nature would be taxable as miscellaneous income. The trading and miscellaneous income allowance gives relief to individuals, up 20-21.qxp_Layout 1 03/07/2020 15:30 Page 120-21.qxp_Layout 1 03/07/2020 15:30 Page 222 East Midlands Business Link www.eastmidlandsbusinesslink.co.uk ENGINEERING As firms across the region look to implement faster, more versatile, and productive machines, the focus on engineering is intensifying, with research and development in this area allowing for better designed and improved solutions to meet these desires. Meanwhile engineering is being influenced by issues such as sustainability and reducing waste, inspiring a new generation of machines, products, and processes. Novel technologies are changing engineering and how products are engineered, designed, and optimised, supporting human work, speeding up production, and efficiently finding ways to solve problems unthought of by humans. Digital twin technology, offering a virtual model of something physical (for instance a product, motor, production line or facility) using data and algorithms, has grown in importance in engineering, for its ability to mirror products and processes to allow rapid identification of problems and easy prototyping of ideas. Digital twins present engineers with real- time information on a creation, let engineers test different designs, put them in various contexts in advance and undertake what if analysis, to see how a product, piece of machinery et al, performs, uncover inefficiencies and mistakes before money, time and energy is spent on production. With engineering projects at the will of constant design and requirements changes, this is particularly useful. Digital twins have famously been implemented in F1 car racing to evaluate new parts, their reliability and performance. Though the idea of digital twins has been established for a while, with the growing use of the Internet of Things (IoT), the technology has become more affordable, meaning dreams of designing, building and altering something virtually before using real resources and uncovering design flaws are feasible. When the twin is combined/reproduced with AR and VR, there is the added potential to better visualise an object, and one could for instance walk around an aircraft that has not been built. Moreover by testing product iterations digitally there is less waste, with less reliance on physical prototypes of something that ‘may’ work. Utilising AI software and cloud computing to design solutions at a quicker pace than the human mind, generative design has also carved out its place in helping engineers. Collaborating with generative design algorithms, first presenting design parameters and constraints to the algorithm, software scans through possible combinations and notes manufacturability to present hundreds of design options which an engineer can assess the viability of and Engineering and the role of engineers is constantly changing, with new technology enabling faster design, optimisation, and time to market. engineering Ever-evolving 24 Á 22-25.qxp_Layout 1 03/07/2020 15:33 Page 1www.eastmidlandsbusinesslink.co.uk East Midlands Business Link 23 ENGINEERING © Shutterstock /Chesky 22-25.qxp_Layout 1 03/07/2020 15:33 Page 224 East Midlands Business Link www.eastmidlandsbusinesslink.co.uk ENGINEERING modify. For example, if looking to create a part with less mass, without compromising performance, the tech can explore thousands of alternatives to meet requirements. Airbus employed generative design when redesigning an interior partition for an aircraft which ultimately reduced the part’s weight by forty-five per cent, in turn reducing jet fuel consumption and carbon dioxide emissions. With generative design engineers are freed from repetitive design tasks, can focus on those of higher value like maximising part performance, and are able to increase productivity and minimise waste. Generative design brings into question how engineers design and can speed up time to market. Though it does not require it, additive manufacturing is viewed as a partner to 22-25.qxp_Layout 1 03/07/2020 15:33 Page 3www.eastmidlandsbusinesslink.co.uk East Midlands Business Link 25 ENGINEERING generative design, to produce what emerges from it without having to be concerned about machine set ups. Honda applied generative design and additive manufacturing to shrink the weight of a crankshaft, creating a prototype around half of the weight of a traditional design. Looking closer at additive manufacturing, the technology has become critical in engineering, transforming how things are made and designed. Using 3D data to create objects layer by layer, additive manufacturing can handle intricate designs and complex geometries better than standard manufacturing methods, and is able to speed up design, with prototypes made quickly, within hours. Waste is also reduced with additive manufacturing as it only uses the material required to produce a part, which in hand reduces material costs. However, parts often need post processing for clean-up and the technology is best suited to low volume production. Advances in additive materials are bolstering demand for the technology though, enabling parts that better suit the rigidity and toughness required and facilitating extended use. Returning to generative design and its interaction with other technologies, when combined with IoT sensors, performance data from mechanical parts can be fed into an item’s digital twin to adjust a design for real world conditions, and sensors can define parameters for generative design instead of the engineer - again showing how the role of the engineer is being transformed. Not only useful in enhancing generative design, engineers are taking advantage of IoT sensors to see how products and machinery are used, and processes run, to adjust and optimise designs. Particularly helpful for engineers evaluating maintenance and performance, machinery, sensors, and their associated data can be wielded to track equipment and components, and when AI prognostic algorithms are utilised, preventative maintenance can be initiated. This lowers maintenance costs and boosts uptime where a broken machine could prove costly, allows spare parts to be on hand and is key in engineering more productive machines. Root cause failure analysis is the next step forward from this, with AI and real time technologies sifting through data to uncover the causes of problems in equipment, and trends that instigate failure. Advantageous for engineering optimal solutions, this will see faults designed out and tweaks made. As engineers work to optimise and design out problems with machinery, components, products and processes, increased focus is being placed on improving environmental credentials. Environmental engineering is on the rise as firms look to make processes greener and slash waste and energy consumption, whilst also reducing connected costs. With engineering such a vast sector, actions taken and research conducted run the whole gamut; engineers are altering designs to improve environmental impact, harnessing renewable energy, working on energy conservation, integrating energy efficient motors, improving batteries, using sustainable materials, improving insulation, implementing value engineering to reduce raw material use and waste in production, are lightweighting, developing electric vehicles and more. Government policy and funding is certainly supporting these advances. In just one recent example, in June, automotive sector projects received £73.5 million to develop advanced technology to cut carbon emissions, recyclable batteries, state-of- the-art motors for electric taxis, cars and vans, and ultra-lightweight components. © Shutterstock /Gorodenkof f © Shutterstock /Alex_T raksel 22-25.qxp_Layout 1 03/07/2020 15:33 Page 426 East Midlands Business Link www.eastmidlandsbusinesslink.co.uk IT AND TELECOMS An audit or review will no doubt reveal areas where businesses can make improvements to their operations, saving costs and increasing efficiency. Of all these areas, perhaps none yield the greatest impact as communications technologies. Updating an outmoded telecoms system not only helps to streamline and modernise a company’s internal process, but also improves competitiveness in an increasingly difficult marketplace. Presently, some 8,000 fax machines are still in use across the NHS, and our beleaguered health service is far from alone with some businesses in our region still sending and receiving faxes despite the drawbacks and security risks. The COVID-19 pandemic has only heightened these issues and laid bare the failings and shortcomings of business communication across the board. Most businesses will at least have broadband in their premises and likely a half decent telecoms system, so they may be looking to augment their IT and communications rather than replace it altogether. Yet simple solutions such as file sharing services, software and apps still go neglected by businesses. WeTransfer and Dropbox enable companies and individuals to securely send – and in the case of the latter, store – documents, images and other important data. This can be accomplished in the office or remotely from a smart phone or tablet and both services are free-to-use up to a certain capacity whilst also offering paid-for subscriptions for businesses. The topic of Dropbox brings us on to cloud storage. At its simplest, the ‘cloud’ refers to software and services that run on the internet rather than locally on one’s computer. As with the internet itself, the cloud isn’t owned or managed by any one organisation but is rather a collective term for a variety of applications operated by different organisations. Though, it’s fair to say, that some organisations have more of a monopoly than others – big names being Google, Amazon and Microsoft. Lesser known, perhaps, is the number of common applications that are cloud- based, including BBC iPlayer. For businesses, this allows more flexible, accessible and trust-worthy storage than a hard drive or local servers – both of which can malfunction, be ruined in fire or flood or corrupt and erase data. Because of its inherent flexibility, cloud computing is perfectly suited to remote workers who can access everything they need from a home office. The same can be said for working on-the-go, with staff able to access files via a smart phone, tablet or laptop, whether that’s on the way to a meeting or during a networking session. Surely that’s preferable to the oft-forgotten and increasingly outdated memory stick. Despite the obvious benefits to business, there are companies that still refuse to implement a cloud storage strategy into their operation. There are a number of reasons why, from misconceptions around the initial investment and subscription costs, to a simple fear of new technologies – something that many heritage SMEs struggle with. But perhaps the biggest Communications East Midlands Business Link looks at how companies are evolving their IT & telecoms and how the coronavirus crisis has forced some businesses to adapt. 28 Á 26-29.qxp_Layout 1 03/07/2020 15:37 Page 1www.eastmidlandsbusinesslink.co.uk East Midlands Business Link 27 IT AND TELECOMS 26-29.qxp_Layout 1 03/07/2020 15:37 Page 228 East Midlands Business Link www.eastmidlandsbusinesslink.co.uk IT AND TELECOMS fear concerns security. However, the security of cloud storage and similar services is improving all the time. Those regular updates on your smart phone usually contain security fixes, meaning they need to be installed as soon as possible. Compared with, say, the telephone, digital technologies are still very young, but it’s important for companies to be cognizant of security risks such as hacking and phishing and tool staff up with the knowledge they need. A robust suit of virus protection services is also a must. Some businesses may think they’re saving money by using a cheaper – or even free – virus protection but, ultimately, it’s a false economy. Businesses cannot afford to cut corners when it comes to cybersecurity. Though hacks are never welcome, bigger businesses are often in a better position to endure them and may even have insurances in place to cover them in such an event. But for SMEs, a hack can be truly devastating and something they may not ever fully recover from. But the benefits outweigh the risks. Take, for example, video conferencing, which has existed in one form or another since the eighties. But now with web- based video conferencing, teams can convene in virtual meeting rooms. The majority of video conferencing solutions typically come bundled with online collaboration tools such as document sharing, text chat and screen sharing. The benefit, of course, is that teams can collaborate over distances and meetings can be hold from parties in two or more different countries. One of the biggest business communication trends tipped for growth is unified communications – that is the integration of real-time and near real- time communications systems. This means bringing together chat services, phone, video conferencing, messaging, feedback and commenting systems into a 26-29.qxp_Layout 1 03/07/2020 15:37 Page 3© Shutterstock /Kate Kultsevych www.eastmidlandsbusinesslink.co.uk East Midlands Business Link 29 IT AND TELECOMS unified system which reduces infrastructure and boasts more features for a more responsive experience. What has taken place with video conferencing becoming near inseparable from other collaborative communication tools will happen right across the sector as companies bring their communications increasingly into one unified solution. Although many workers have returned to their offices having worked from home for months over lockdown, many are still set up remotely. Necessity has driven the widespread adoption and use of video conferencing applications such as Zoom. Likely, these tools will simply become part of a business’ toolkit rather than just being a means of surviving the coronavirus crisis. Though none of us would have asked for the pandemic, we can use it is a catalyst to usher in step changes in outdated IT and telecoms systems and usher in an age of more unified, interconnected business communication. Importance of security in a crisis Webeye, a Mansfield-based security specialist, explores the importance of robust, reliable securing during the coronavirus crisis and what measures businesses can take. Construction sites, empty properties and remote locations are under threat. You need to be confident your assets are safe and, if intruders do break in, you need to know ASAP. Security becomes ever more important in times like these and technology can play its part in keeping everyone involved safe. Governments are encouraging staff to stay at home, but how can you check your business premises are protected and your security provision is working properly or at all? This is where effective alarm delivery is crucial to maintain a credible security programme. If you’re monitoring sites, you need to make sure you can receive alarm notifications directly to your home computer, tablet or mobile device. But by their nature, home devices are not as robust as professional security systems. Webeye has developed a cloud technology that is robust platform and app that have thought through the pitfalls and have put checks and balances in place to make sure you receive credible alarm notifications. You also have to think about guarding and security staff. If you have no physical security staff on site you’ll need effective systems to be your eye-and-ears on the ground. Advances in wireless and battery technology means there are systems on the market such as the Videofied Visual Verification system or Webeye’s own webeyeOCULi that can effectively monitor sites where there is no main power. They trigger upon intrusion and send video clips directly to your home device via the webeyeCMS cloud receiving platform that can act as your automated central monitoring station. To find out more, visit www.webeyecms.com, email sales@webeyecms.com, or call 01157 149990. 26-29.qxp_Layout 1 03/07/2020 15:37 Page 4Next >