Author: Glenn

HMRC’s CEST tool gets a revamp from 30 April 2025, with clearer questions and updated guidance to help users decide employment status for tax—plus stronger backing from HMRC.

In a Written Ministerial Statement delivered on 28 April, the Exchequer Secretary to the Treasury announced a series of administrative and simplification measures designed to advance the government’s commitment to modernising the tax and customs systems.

Among these measures is an important update to HMRC’s Check Employment Status for Tax (CEST) digital tool, set to take effect from 30 April 2025. The CEST tool plays a key role in helping users determine whether a worker should be treated as employed or self-employed for tax purposes across both the private and public sectors.

The forthcoming changes aim to improve usability and clarity, making it more accessible and efficient for individuals and organisations alike. In conjunction with these technical improvements, HMRC will issue updated guidance to support users in navigating the revised set of questions, ensuring they are better equipped to use the tool correctly and confidently.

The service provides HMRC’s view as to whether IR35 legislation applies to a particular engagement and whether a worker should pay tax through PAYE as well as helping to determine if the off-payroll working in the public sector rules apply to a public sector engagement. HMRC has confirmed that it will stand by the outcome produced by the CEST tool, provided that the information entered is accurate and complete. However, HMRC will not stand by the results of contrived arrangements and designed to get a particular outcome from the service.

The service can be used by a variety of users, including:

• Workers providing services;
• Individuals or organisations engaging workers; and
• Employment agencies placing workers with clients.

For many small and medium-sized enterprises (SMEs), the core business keeps the lights on, but additional income streams can provide much-needed stability and growth. Whether you're a service provider, a retailer, or run a niche consultancy, diversifying your revenue can cushion seasonal dips, economic shocks, or customer churn. Here are some practical ways to bring in extra income without straying too far from your core business.

Offer Online Courses or Webinars

If you’ve got specialist knowledge, turn it into a digital product. Creating online courses or hosting webinars allows you to monetise what you already know. This works particularly well for consultants, tradespeople, or niche service providers. Platforms like Teachable or Thinkific make setup relatively easy.

Introduce Subscription Services

Subscription models work for more than just magazines. If you sell products, consider offering a monthly bundle or repeat-order service. If you’re in a service industry, a retainer model or premium membership can offer exclusive content, support, or discounts to subscribers.

Rent Out Equipment or Space

Do you have tools, machinery, or office space that sits idle some of the time? Renting these out, even on an occasional basis, can generate passive income. This is especially useful for creative or construction businesses that own specialist gear.

Sell Branded Merchandise

If you’ve built a recognisable brand, merchandise could be a low-effort income stream. Think branded mugs, notebooks, tote bags, or even digital downloads like planners or templates. Print-on-demand services mean you don’t need to hold stock.

Affiliate Marketing or Product Referrals

If you already have a mailing list or online presence, recommending relevant products or services could bring in commission. Just ensure the partnerships are relevant and credible to maintain trust with your audience.

Create a Paid Newsletter or Exclusive Content Channel

If your business produces insights or useful information, consider launching a paid newsletter or members-only blog. Tools like Substack or Patreon allow you to test this with minimal upfront cost.

Offer Freelance or Consulting Services

If your business has a quiet season, consider offering your skills on a freelance basis. This works well for design, IT, marketing, or finance professionals looking to supplement core revenue.

Need help tailoring any of these ideas for your business? Call now so we can discuss your options.

Gross profit is one of the clearest indicators of how well your business is performing. It’s the money left after deducting the direct costs of producing goods or services from your turnover. If your gross profit margins are tight, your business will struggle to cover overheads, let alone make a net profit. So, here are a few practical tips to help boost your gross profit returns.

Review Your Pricing Strategy

One of the quickest ways to increase gross profit is to charge more. That sounds simple, but many small business owners hesitate to raise prices out of fear of losing customers. If you’ve not reviewed your prices in the last year, you’re probably overdue. Inflation, supplier costs and market demand all change – and your pricing should reflect that. Even a modest price increase can make a noticeable difference to your bottom line.

Cut Direct Costs Without Cutting Corners

Take a close look at your cost of sales. Can you negotiate better terms with suppliers? Are there alternative materials or services that are more cost-effective without affecting quality? Regularly benchmark your supplier costs and don’t be afraid to shop around. That said, cutting quality to save money usually backfires. The goal is value, not just cheapness.

Upsell and Cross-Sell

Increasing the average transaction value is a smart way to lift gross profit. Train your team (and yourself) to spot opportunities to upsell or cross-sell. For example, if you sell coffee, can you offer a pastry at a discounted rate? If you're in professional services, can you bundle related services together? It’s often easier to sell more to an existing customer than to find a new one.

Streamline Production or Service Delivery

Time is money, especially if you sell services. Look at how you or your team deliver work. Are there steps that can be automated or removed? Can you reduce waste, rework, or idle time? The more efficiently you operate, the more profit you keep.

Monitor Your Margins

Finally, don’t rely on gut feel – use your accounts. Regularly track your gross profit margin by product, service, or client type. This helps you spot what's making money and what's not. Focus your energy where the returns are highest.

When claiming tax relief or capital allowances on R&D, it’s crucial to ensure activities meet strict statutory definitions. Understanding Section 437 ITA and DTI guidelines is key to securing legitimate tax benefits and avoiding costly mistakes.

An activity is generally considered as R&D if it meets two key criteria:

1. It is recognised as R&D under standard accounting practice; and
2. It satisfies the specific conditions set out in the Department of Trade and Industry (DTI) guidelines.

In addition, the definition of R&D for Capital Allowances purposes includes oil and gas exploration and appraisal activities. These are defined as operations conducted with the objective of:

• Searching for petroleum within a defined area; or
• ascertaining the characteristics, extent, or reserves of a petroleum-bearing area in order to assess the commercial viability of extraction.

The legislation also allows for the definition of R&D to be further clarified or restricted by secondary regulations made under ITA/S1006. These regulations may either designate certain activities as qualifying R&D or exclude specific activities from being treated as such.

For the purposes of Research and Development Allowances (RDA), any activity defined as R&D under ITA/S1006 regulations must be treated accordingly. Conversely, if an activity is specifically excluded by regulation, it must not be considered R&D for RDA claims.

After a business closes, income can still arise. Post-cessation receipts must be properly reported and taxed under specific rules. Knowing what qualifies — and what does not — ensures businesses and individuals stay compliant with UK tax law.

Under the legislation, the individual or entity who receives, or is entitled to receive, the post-cessation income is liable to Income Tax or Corporation Tax on that income. This recipient does not need to be the same person who originally carried on the trade. The key factor is whether the income in question meets the definition of a post-cessation receipt.

To fall within the scope of these rules, the income must:

• be received after a person permanently ceases to carry on a trade;
• arise from the carrying on of the trade before the cessation; and
• not be otherwise subject to tax.

Additionally, the legislation outlines specific types of income that are treated as post-cessation receipts beyond those that naturally arise from the winding down of a trade. However, certain types of payments, such as consideration received for the transfer of trading stock, are specifically excluded from this classification and are dealt with under different tax rules.