Small and medium-sized businesses should be proactive about finding novel ways to reduce energy consumption through the winter months and avoid relying on a Government-backed support package, according to tax and business advisers at accountancy firm, Menzies LLP.
With a new prime minister due to be announced on Monday, many businesses are concerned that any steps the new Government might wish to take to soften the impact of rising energy costs might not come quickly enough.
Richard Godmon, tax partner at accountancy firm, Menzies LLP, said, “Businesses are hoping for a just-in-time business support package, similar to that provided during the Covid-19 pandemic, but it is by no means certain that this is deliverable in the time frame needed to keep them trading through the final quarter of 2022.
“We are advising businesses to look for ways to reduce their energy consumption with immediate effect by examining their operating model and considering how it might be changed. Hospitality and leisure businesses could restrict opening hours and some have been considered adopting a three-day week.
“Office-based businesses may be able to alter shift patterns to optimise use of daylight hours or fast forward renovations to improve energy efficiency by introducing LED lighting or switching to equipment that has a low power standby feature. Importantly, some of these renovations could also qualify for enhanced tax relief.
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“Businesses need to think laterally about how they could adapt their working environment and practices to cut their energy consumption from the start of October.”
SMEs will be hoping that the new Government acts quickly to introduce a Covid-style support package. Ideally, this should include grants and interest free business loans, payable over a long term. The reintroduction of deferred tax payments and business rates exemptions would also provide practical help to businesses, helping them to manage cashflow.
However, businesses can’t rely on more tax breaks, as Richard Godmon explained, “While a temporary reduction in VAT would certainly help to boost margins and alleviate cashflow pressures, the Treasury will want to protect tax revenues as far as possible to meet the cost of other support measures.
“The same applies to the recently introduced Health and Social Care Levy, which increased the National Insurance Contributions payable by employers by 1.25 percent – this is likely to be viewed as a post-pandemic revenue generator.
“In the short term, businesses should expect more support in the form of Government-backed grants and loans, but more significant tax breaks are unlikely.”
Advice for small businesses that are finding it difficult to pay their energy bills is available on Ofgem’s website here.
The new Government is expected to announce an emergency Budget to take place later this month and further fiscal measures could be announced then.
Source: London Loves Business