Don’t ignore the red tape when setting up in business
There are many important business duties and rules that all business owners should be aware of, from tax and employment rules to pensions and required industry regulations. Understanding what these are, which ones you might need to implement and how it could affect your business if you don’t is crucial for small businesses. Growing a business can also result in increased regulation, so it’s important to know how this might affect you.
Meeting tax duties
One of the key red tape aspects of business has to be tax duties. Getting it right from the start will save you a huge headache later on:
- Choose the right business structure – get advice on which business structure will suit your business goals both now and in the future. Having the right structure will mean your business can operate in the most tax efficient way from the start, so it’s always best to seek professional advice on this
- Establish an adequate book keeping system – whether you do this manually or using accountancy software systems such as Xero, it is absolutely vital to keep accurate business accounts both for ease of tax return filing at year end, and to meet HMRC requirements
- Be in-the-know on available tax relief – there may be available tax relief that could apply to your business and is worth exploring. A good accountant will be able to advise on this. It’s advisable to use an accountancy firm that can give you guidance on all tax matters, as tax is an evolving landscape with rules and rates changing on a regular basis
- Get to grips with deadlines – not meeting tax payment deadlines can result in surcharges and needless interest costs. Knowledge of deadlines is key, and being sensible when it comes to allowing enough time for the payments to reach HMRC i.e. ensure if a payment is due over a weekend, make the payment early enough to clear in time.
There is a plethora of red tape around employment, and when thinking about employing staff, you should consider:
- Legal advice – there is much legality around the recruitment of staff, the contracts they are employed on, and other aspects such as holidays they are entitled to. Getting legal advice is a must to help ensure you carry out the necessary steps and due diligence in this area, to avoid costly problems later on. The cost of employing professional advice here will be money well spent
- Accountancy advice – you can fulfil employee payroll duties yourself, but dependent on how much time you have and how many employees you have, you might feel it is more efficient to outsource this to your accountancy firm. The compliance around payroll can be complex with RTI report submission and various rules being updated all the time, so it’s worth outsourcing to an accountant that offers the latest in payroll processing and is fully compliant with HMRC rules
- Pension auto-enrolment – this has been rolled out over the last five years or so, whereby businesses have had to auto-enroll employees into a pension scheme at their designated staging date. Most new companies will now have to auto-enroll straight away, as there is no longer a roll-out time. There are fines for non-compliance, so it’s worth exploring the options and getting a pensions provider in place if you are looking to bring staff on board.
Data protection rules
When thinking about marketing to your customers, you may want to consider electronic delivery of promotional materials such as e-newsletters and email shots – which are incredibly cost effective to produce and execute. But there is red tape around this area too. Do consider:
- General Data Protection Regulation (GDPR) – it’s important to ensure that you are not sending any communications to customers or potential customers who have not opted in to your marketing. The General Data Protection Regulation (GDPR) coming into effect from 25th May 2018 will require you to check with your customers that they are happy to continue to receive communications from you, and if you don’t and they aren’t, you could be liable for a large fine. You will need to remove anyone from the list who has unsubscribed, in order to be compliant.
Dependent on what industry you’re in there could be a variety of regulations governing your profession or sector, so it’s important to be knowledgeable about these to ensure your business operates within the rules. Get in touch with industry bodies and organisations to find out what these might be and how you can comply.
For many businesses, regardless of sector, it’s worth looking into:
- Public liability insurance – it’s there to protect you and the public in the event your work caused damage or injury to anyone. The amount of cover you’ll need and the cost of the cover will vary depending on what type of business you’re in, but the cost of not having it could be astronomical if an accident were to occur and blame could be attributed to your business, as claims could be anything from thousands to millions, dependent on the incident
- Professional indemnity insurance – for those in professional services, professional indemnity insurance covers legal costs and expenses associated with a case that might be brought against you as a result of you providing inadequate advice, services or designs, that could cause your client to lose money. Again, legal fees could run very high in such cases.
Whilst the thought of employing professional advice to help you wade through the red tape and comply with regulations might be scary and deemed unaffordable for small businesses, the cost of not getting advice on such important matters can be far higher. Unexpected costs associated with not being compliant can really rack up, so investment in getting it right is wise.