< Previous East Midlands Business Link www.eastmidlandsbusinesslink.co.uk CORPORATE FINANCE W hether an ambitious start- up seeks to turn ideas into tangible products, or well- established enterprises chart pathways ahead for sustained growth and expansion, financial stability is as critical as it is challenging. Traditionally, companies have relied on conventional sources of funding, such as bank loans, venture capital, and angel investors. However, these avenues often come with restrictive criteria and yet more obligations for businesspeople. Sometimes, this means traditional resources are rendered inaccessible or impractical for established enterprises, as much as aspiring entrepreneurs. In recent years, the rise of alternative financing platforms has revolutionised corporate finance, opening new avenues for raising capital and accessing financial resources. Crowdfunding platforms democratise the process of fundraising by allowing entrepreneurs to pitch their ideas directly to a broad audience of potential investors. Digital trade agreements and e-commerce platforms have facilitated cross-border transactions and expanded market opportunities for businesses, enabling them to tap into global markets and diversify their revenue streams. Amidst these changes, employee ownership is ever more compelling for businesses looking to improve their financial performance, and enhance their competitive edge. In its own transformation with far-reaching financial benefits, this progressive model moves beyond hierarchical routes of employment, giving workers a tangible stake in the success of the company. The sense of ownership creates contentment in responsibility, while nurturing Unlocking prosperity As traditional funding sources become increasingly restrictive, businesses are turning to alternatives to revolutionise corporate finance. www.eastmidlandsbusinesslink.co.uk East Midlands Business Link CORPORATE FINANCE © stock.adobe.com/ipopba collaboration and innovation within organisations. Employee ownership is good business because it builds a profound sense of security and participation among workers. When employees have a direct stake in the company’s performance, their job satisfaction soars. They feel a sense of pride in their work and a commitment to the organisation’s success. When all these aspects are on the up, work ethics get a boost too, translating into increased productivity, reduced turnover rates, and morale boosts for everyone. A heightened sense of accountability is also filtered throughout the organisation, instead of all being laid on founders and executives. With ownership comes a greater responsibility for the company’s success. Employees understand that their actions directly impact the bottom line, leading to a culture of transparency, diligence, and integrity. This sense of accountability improves performance while building trust among stakeholders, which enhances the company’s reputation with other potential avenues for support and capital. Furthermore, employee ownership gives workers a meaningful stake in the proceedings of the company. By involving employees in decision-making processes, businesses tap into a wealth of diverse perspectives and ideas. This inclusivity drives innovation, promotes creativity, and positions the company for long-term success. Employees feel valued and respected, leading to stronger bonds between management and staff and a collective commitment to achieving common goals. There are various methods of 22 Á East Midlands Business Link www.eastmidlandsbusinesslink.co.uk CORPORATE FINANCE implementing employee ownership, each with its own pros and cons. One common approach is the Employee Stock Ownership Plan (ESOP), where employees acquire ownership through a trust fund that holds company shares on their behalf. ESOPs offer tax benefits and align employee interests with company performance, but they can be complex to administer and may not suit all business structures. An alternative which may prove less complicated is direct equity ownership, where employees purchase shares in the company. This approach provides employees with a direct financial stake in the company’s success and can be tailored to suit the organization’s specific needs. However, it requires careful structuring to ensure fairness and transparency, and may not be viable for all businesses. Perhaps the simplest, most democratic, and inclusive means of engaging in employee tenure is cooperative ownership. In this approach, employees collectively hold and control the company, claiming one vote in any decision-making agreement regardless of the number of shares they personally hold. This approach brings all owners together as community and builds cooperation among workers. Perhaps the main setback is that this route requires robust governance, and may face management challenges or capacity and resource constraints. Setting up an employee-owned business from the foundations, as one would expect from any such project, necessitates careful planning and consideration. There will likely be a great number of legal and financial complexities, as well as an adjustment to sharing a precious idea with others, especially if it means handing them collaborative control. But provided clear governance structures, communication channels, and incentive systems are thoughtfully planned, there’s every chance for success. If anything, it might be easier for a start-up than an established company. Integrating employee ownership into www.eastmidlandsbusinesslink.co.uk East Midlands Business Link CORPORATE FINANCE an existing business or model requires a deeply tactful approach. Engaging all employees in the process, communicating the benefits and implications of ownership, and addressing any concerns or resistance, allows each person to feel involved and supported from the very beginnings of their shared ownership. This may involve gradually phasing in new attitudes and actions, providing education and training, and seeking input from stakeholders throughout the transition process. In the long term, businesses stand to benefit immensely from employee ownership. Beyond the immediate financial advantages, employee-owned companies tend to outperform their counterparts in terms of productivity, profitability, and resilience. They have higher levels of innovation, and greater adaptability to market changes, while hired employees are more loyal, long- term strengths. Collective responsibility and successes shared are the keys; an assurance that any achievements will be thanks to every stakeholder. The success of the John Lewis Partnership perfectly highlights the long- term benefits of employee ownership. Through its unique ownership structure, where all employees are partners in the business, John Lewis has built a prosperous brand on cooperative gains. Its financial success has survived even during the challenges of current and past economic struggles, earning the company a reputation as a model of employee inclusion and corporate responsibility. By empowering workers with a tangible stake in the company’s success, businesses can unlock a wealth of benefits. While implementing employee ownership requires careful consideration, the long-term rewards far outweigh the challenges. Sharing in success may be just the remedy against ever needing to rely on restrictive and outmoded finance providers. After all, to them your goals are only business – for you and your employees, they’re so much more. © stock.adobe.com/rh2010 East Midlands Business Link www.eastmidlandsbusinesslink.co.uk TAX Jennie Brown, tax partner at Streets Chartered Accountants, considers tax changes set to affect individuals’ finances. A s we usher in the new tax year, several significant changes are set to impact individuals’ finances. The key changes and their impact are outlined below: Dividend allowance slashed The tax-free dividend allowance has been reduced from £1,000 to £500. This will affect both those who receive dividends as part of investments but also individuals who trade through a limited company preferring to take a minimal salary, plus dividends – an approach which can be more tax efficient in terms of remuneration planning, as dividends are not subject to National Insurance and taxed at a lower rate than salary. However, National Insurance Contribution reductions, along with Corporation Tax rises and the reduction in dividend allowance have and will for some make being self-employed or paying them a salary rather than dividends more attractive. Therefore, it may be time to review your remuneration strategy. Capital Gains Tax threshold reduced The annual exempt allowance for capital gains tax (CGT) will be halved from £6,000 to £3,000, down from £12,300 just two years ago. Additionally, there will be a new reduced CGT rate of 24% for residential property sales for higher-rate taxpayers, down from 28%, while the basic rate remains unchanged at 18%. These changes may give rise to the need to consider the sale or acquisition of property or other business £60,000 from the current £50,000. However, the charge is tapered, meaning it may still be beneficial for parents or their partners earning between £60,000 and £80,000 to claim child benefits. The charge increases by 1% for every £200 of income exceeding £60,000 and equals the amount of the child benefit payment if income exceeds £80,000. Child benefit rates will increase with the eldest child receiving £25.60, up from £24, and other children receiving £16.95, up from £15.90. Pensions, making retirement better? For private pensions, the new lump sum allowance will be £268,275, while the lump sum and death benefit allowance will be £1,073,100, with the lifetime allowance being eliminated. The state pension will increase to £221.20 a week from £203.85 and working tax credit elements will also see adjustments. Inheritance Tax remains frozen The IHT threshold remains frozen at £325,000, with no increase for 15 years, perhaps not surprisingly the amount paid to HMRC in IHT is at an unprecedented level with £7.5bn said to be collected in the tax year 23/24. It might therefore be time for many to look at IHT planning in the year ahead. These changes are all part of an ever- changing tax landscape and continue to highlight the need for individuals and businesses alike to keep up to date, as well as to ensure that they seek advice from specialist tax advisers. assets which might be subject to CGT. National Insurance Contributions reductions for employees and the self employed Employee national insurance contributions (NICs) will see a further 2% reduction to 8%, following a prior 2% cut announced in the Autumn Statement 2023. This reduction is estimated to save the average worker on £35,400 over £900 annually, resulting in a reduced tax rate of 28% for basic rate taxpayers compared to the previous 32% as of 5 January 2024. For self-employed individuals, the main rate of Class 4 NICs is being reduced from 9% to 6%, alongside the abolition of the requirement to pay Class 2 NICs. These changes aim to simplify the tax system and save an average self-employed person on £28,000 over £650 annually. Threshold freezes and adjustments The basic rate and higher rate tax thresholds will remain frozen until 2028 at £12,570 and £50,271, respectively. This freeze may pull more taxpayers into higher-rate tax brackets, with over a million expected to face 40% tax charges for the first time. The additional tax 45% threshold remains unchanged at £125,140. Additionally, the income limit for married couples’ allowance increases to £37,000 from the current £34,600. High Income Child Benefit Charge (HICBC) Increase The high income child benefit charge (HICBC), the threshold for which child benefit can be received, will rise to East Midlands Business Link www.eastmidlandsbusinesslink.co.uk RELOCATION AND INWARD INVESTMENT Change of scenery Moving your business can bring about significant transformations, requiring careful consideration. Although it’s not a one-size-fits-all solution, with strategic planning and proactive steps, businesses can harness relocation or operational redistribution to their advantage. www.eastmidlandsbusinesslink.co.uk East Midlands Business Link RELOCATION AND INWARD INVESTMENT © stock.adobe.com/ImageFlow A change in locale opens doors to expansion opportunities, whether through spreading out within the current locale or establishing new national offices. Businesses are increasingly considering relocation as a means to reduce carbon emissions, and operate from more environmentally friendly and cost- effective premises. By investing in purpose-built developments, eco-friendly features can be integrated into almost any premises, from recycled materials to renewable energy sources like solar panels or wind turbines. Such initiatives reduce environmental impact, enhancing operational sustainability, and appeal to eco-conscious customers and consumers. But the green bonuses are only one facet of the extensive potential advantages of relocating to a new environment, with different business peers and connections. Collaboration with new businesses can even refresh the synergistic corporate environment within cities. Business parks are an excellent example of the potential in building such close connections. Some are specialised and tailored to specific industries, increasingly enabling prospective clients to anticipate their business environment, building shared visions that help one another grow. From a logistical perspective, business parks are conveniently located near transportation hubs, facilitating efficient access to motorway travel, and links to services and amenities. Establishments with long- term expansion plans can find space here, with a sturdy foundation of a single base of operations that provides accessibility for both company and customers. Inward investment, otherwise known as foreign direct investment (FDI), can intersect with or stand apart from relocation. By expanding operations into foreign markets, businesses can tap into a broader consumer demographic, diversifying their income streams, and reducing their reliance on domestic markets whether they move base or not. This diversification strengthens the resilience of businesses to economic changes, which means greater ability to capitalise on the emerging trends and opportunities of the global marketplace. When inward investment overlaps with the relocation process, it can do so in various ways. When a foreign company 28 Á East Midlands Business Link www.eastmidlandsbusinesslink.co.uk RELOCATION AND INWARD INVESTMENT decides to invest in a new market, it may choose to do so by relocating or establishing new facilities in the host country. This enables the company to physically establish a distinctly visible presence in the target market, creating mutual benefits for businesses and host countries alike. Relocation or building new facilities can be poised to take advantage of factors such as lower operating costs, access to skilled labour, favourable regulatory environments, or proximity to key markets. By investing in new facilities, such as manufacturing plants, offices, or research and development centres, jobs can be created to feed the local economy, or provide spaces that contribute to the development of local industries. When companies relocate, or establish research and development centres in a different host country, they often bring with them expertise, technologies, and best practices that can benefit local businesses and industries. This exchange of knowledge, skills and brand association can drive a renewal of possibilities for the local area. Inward investment also potentially drives demand for commercial real estate and infrastructure development in any host countries, building prospects for real estate developers, construction firms, and service providers to capitalise on the influx of investment, and cater to the needs of investors across the globe. By attracting foreign investment, host countries may then diversify their economies, build critical infrastructure, and enhance their competitiveness on the global stage. This, in turn, can © stock.adobe.com/wavebreak3www.eastmidlandsbusinesslink.co.uk East Midlands Business Link RELOCATION AND INWARD INVESTMENT strengthen trade ties, foster economic integration, and promote cross-border cooperation, creating a positive cycle that benefits investors and host countries alike. Securing the funding to back such bold moves proves the stumbling block it always does. Support will be crucial in this area, perhaps more than any other, to grapple with substantial upfront costs associated with purpose-built developments. However, tailored solutions often require significant capital investment, particularly daunting for small and medium-sized enterprises with finite resources. Ongoing operational expenses associated with new premises, such as rent, utilities, and maintenance, can strain budgets, especially during the initial phases of relocation; this goes double for a growing or consciously limited business. To address these financial challenges, make sure to explore a variety of avenues for funding and support before taking leaps with anyone. Government grants and incentives offer a lifeline for relocation projects aligned with regional development objectives, providing financial assistance and favourable terms if a business qualifies. Additionally, forging partnerships with financial institutions or private investors can help secure capital for relocation initiatives, spreading the financial burden and easing the involved risks. Operational disruptions are another formidable hurdle, especially with relocation. On top of intruding on productivity and customer service, transferring to a new premises might involve transporting equipment and inventory, coordinating with suppliers and service providers, and reconfiguring IT infrastructure. To keep interruptions to a minimum, compose a relocation plan which take every stage of transition into account. This includes establishing clear timelines, dividing responsibilities between key personnel, and thoughtfully taking note of all communication with stakeholders along the way. Project management support and professional relocation services may be lifesavers when maintaining business continuity during relocation. But for some pointers on tackling changeovers independently, implementing temporary measures such as remote work arrangements, or alternative service delivery channels can help smooth over any gaps for customers and stakeholders. Prioritising engagement and communication with employees throughout the relocation process is also essential, to ensure that staff feel supported and informed every step of the way. Relocation is a pivotal time for a company, bringing opportunities for reinvention, expansion, sustainability, and many more benefits besides. Whether reinvigorating corporate identity, expanding operations, or embracing eco- friendly practices, relocating premises signifies the beginning of a new chapter. Starting fresh is as daunting as it is thrilling, but through planning, drawing on partnerships, and a commitment to compassion for all involved, businesses can beat the challenges and seize the opportunities presented by relocation, setting the stage for the new successes the future will bring.Next >