Why Directors Facing Insolvency Must Beware Transactions at Undervalue

When a director of a company is facing insolvency, the thought may well occur to them to that it may be a good idea to sell or transfer company assets as quickly as possible in order to protect them.

However, it’s actually a requirement for company directors to maximise creditor returns during insolvency, and therefore by selling or transferring assets at an undervalue they could be considered to be carrying out wrongful or fraudulent trading. Company directors therefore need to be very careful of transactions at undervalue if they are facing insolvency.

What are Transactions at Undervalue?

A transaction at undervalue is a transaction which doesn’t reflect the asset’s true market value. This can be either a sale of an asset or a transfer of assets. This can be a problem as company directors are required to maximise their creditors’ returns during insolvency, and as such these transactions can be seen as fraudulent or wrongful.

During insolvency, it is the job of insolvency practitioners to closely inspect all company transactions, and they will highlight any that they feel are questionable or suspicious. Administrator and liquidators then have the power to apply for a court order which can reverse any transaction at undervalue and restore the situation to the state it was at before the transfer or sale took place.

It’s not just the most recent transactions that will be inspected, either; insolvency practitioners may look into a company’s transactions for up to two years before the point where they went into administration. If they find any transaction which has a significantly reduced value, or gifts which have been made without an associated payment, they are duty bound to make a report to the Secretary of State.

How are Undervalue Transactions Penalised?

Transactions at undervalue are a breach of the Insolvency Act 1986, meaning that company directors that undertake this practice could face both financial penalties as well as the prospect of criminal prosecution. Indeed, company directors can be held personally liable for some or all of the company’s debts, and may also be disqualified for up to 15 years if it is believed that they have traded wrongfully during insolvency.

Following Formal Insolvency Procedures

It’s therefore extremely important that company directors think very carefully before they decide to trade at undervalue in order to try to protect company assets. Creditor interests must always come first, and if you want to avoid any accusations of transactions at undervalue, it’s important that company directors follow a formal procedure for selling or transferring assets.

This process usually requires a board meeting in the first instance where all action is carefully documented. A RICS qualified surveyor or valuer should be appointed to make sure that going concern and forced sales values are provided. Once assets have changed hands, it’s also important to ensure that funds are banked swiftly and full records retained for several years following the statutory requirement.

If you are at all unsure on how these records need to be maintained, consult the advice of local bookkeepers. They will be able to ensure that your documentation and paperwork is present and correct.

Fake Bailiff Warning for Businesses

Local businesses have been warned of a fake bailiff scam. Police have been warning businesses that conmen are contacting companies requesting payment for non-existent debt.

The conmen are targeting small to medium sized businesses primarily, often after finding their contact details in online business directories. They then phone them and try to extract cash from them by claiming that they are behind with certain fees.

Businesses Targeted

A range of businesses have so far been targeted, including nurseries, manufacturers, taxi services and hotels, however all business types are at risk from the scam.

Police have found that the fake bailiffs seem to be targeting those businesses with slightly more mature and elderly directors, who are traditionally seen as the victims of such scams.

Cold Calls

Businesses are finding themselves at the mercy of cold calls from these fake bailiffs. They are purporting to be bailiffs working on behalf of the court, attempting to recover debts which don’t exist.

The targeted companies are then requested to make payment by means of a bank transfer, and, if the contact that the conmen are dealing with refuses, the fake bailiffs threaten to visit the premises in order to recover the debt that they claim is owed to them.

Dealing with the Conmen

The advice from the police, Trading Standards and the accounts managers at the business directories for dealing with the conmen is to ask for details of the debt collection agency, and if you are at all suspicious, hang up the phone. Do not under any circumstances agree to transfer money or give your bank details.

Once you have hung up the phone, report them to Trading Standards who can investigate.

Are you Wasting Too Much Time on Admin?

Do you find yourself constantly tied up in the red tape of admin? Struggling with day to day financial tasks such as tax calculations and payroll, when all you really want to do is work on the products and services you offer? If so, you’re not alone.

According to Tide, 63 percent of young businesses are spending too much time on admin. At least one day a month, to be precise. And these tasks typically include the likes of administrative financial tasks, tax calculations, invoicing and paying invoices, expenses and setting up bank accounts.

So are you wasting too much time on admin?

Bank Account Woes

Some of the biggest problems that the 149 small business owners surveyed had were with their bank accounts. To this end, more than a third rated the help and support that they received from their bank accounts as poor or very poor, and two thirds said that they wouldn’t be likely to recommend their bank to other business owners.

36 percent of respondents also commented that they were dissatisfied with the ease of use of their business bank account.

Financial Admin Difficulties

And the financial administration problems don’t stop there. According to the survey, other admin difficulties can be found in the likes of tax calculations, accounting, recording and paying expenses, invoicing, payroll and having to manage multiple different financial applications.

When asked, the top five things that most new business owners had on their wishlist to make their lives easier included:

• Easy internet banking (listed by 80 percent of respondents)
• A good mobile app (66 percent)
• Free transactions (54 percent)
• A speedy set up (39 percent)
• A good length to the free banking period (36 percent)  

Factors the respondents didn’t rate highly included some of the more traditional aspects of banking, such as banks offering an overdraft, telephone support or the proximity of a local branch.

The Wisdom of Age

The report also found that the age of the business had a factor in determining which admin tasks companies struggled with the most. For those businesses less than a year old, tax was one of the aspects that they found hardest to deal with, whereas more established companies found that the responsibilities of payroll were more of a burden.

No matter what difficulties you may be experiencing as a company, or how established your firm is, the expertise of local bookkeepers could be all you need to keep your administration in order. Speak to your local bookkeepers today to establish how they can stop you from drowning in admin.

Accentism – the Latest Workplace Discrimination Issue?

Employers currently have a duty to protect workers from harassment and victimisation that is based on gender, sexual orientation, religion, race or age. Now there is a suggestion that accents should be added to that list.

A study by the University of Manchester found that many people feel pressured to change their speech patterns while at work. Dr Alex Baratta, who conducted the study with students said, “Clearly, most people modify their accent not because they lack pride in it, quite the opposite in fact. It's actually because they fear the negative perceptions others might have of them if they don't.”

High Profile Examples

This is borne out by the example of a teacher interviewed for the research who revealed that he had been told by an Ofsted inspector to sound more southern while working in a school in Berkshire. Steph McGovern is a business journalist working for the BBC. She also has a northern accent and has said that colleagues treated her as "too common for telly" because of her accent. She wrote in the Radio Times that she didn’t get promoted because of the way she spoke.

Why it Matters

While some people can change the way they speak quite happily, for others it can cause distress. Dr Baratta said that while playing down their regional accents is a common practice, “we should not assume that it is accepted by all speakers without issue. As part of my ongoing research, many participants see accent modification as synonymous with selling out and a clear threat to their sense of self.” You can read more about Dr Baratta’s research on his specially set up website here.

Other academics have pointed out that dialect helps people to feel they belong in their communities. It is becoming more popular rather than less. Dr Baratta insists that "Any form of discrimination, including accentism, shouldn't be tolerated in an inclusive society."

In anticipation of any change in the law, you and your team could take care that the accents of interviewees are not considered while recruiting, and that all staff are aware that accentism will not be tolerated. Your local bookkeepers could also be keeping an eye on this area and may volunteer information on developments as they arise to ensure you stay up to date.

An Employer’s Guide to Brexit

Following the Brexit referendum there is some disquiet and anxiety in the working world of the UK. Some employees from EU countries are worried about whether they will be able to remain in their jobs here and some even feel unwelcome. The wave of hate crime in the streets has reinforced that feeling.

What Employers Can Do

Of course it could easily translate into the workplace. Employers need to be on the lookout for any harassment or unfair treatment as they have a duty to protect their staff members from it in compliance with discrimination legislation. It’s worth considering whether your employees need a reminder of your policies to keep to these rules.

If you have recruited from across the EU to fill job needs that couldn’t be filled locally, you may be concerned about the future too. Now is the time to start thinking about how you can manage without them by attracting more local people, perhaps by setting up apprenticeships and training schemes. Always remember, though, that you may not currently discriminate on the basis of nationality when recruiting new personnel.

Meanwhile you might look at ways to help your EU staff protect their status. If they have been here for over five years, they may be eligible to apply for naturalisation, and become a British national, or try for indefinite leave to remain. All the relevant information and documentation is available on the Immigration Direct website.

What Might or Might not Change

Any changes will not happen overnight. Those that might change include the ones introduced by recent EU case law, since the European Court of Justice will not have any power in the UK once we leave the EU. Currently these are the calculation of holiday pay to include the elements of overtime and commission, and accruing holiday pay while on sick leave. The 48 hour limit on the working week is an EU Directive that has not proved popular in the UK, as are the relatively new Agency Worker Regulations, so it’s also possible that they may be changed in time.

Employees may be happy to note that no changes are expected to holiday entitlement, since the UK currently allows 5.6 weeks per year, while the European entitlement is only 4 weeks. Family friendly rights and flexible working is another popular element of employment law that is unlikely to change. The Equality Act 2010 is expected to remain intact as well.

Communicating with your Personnel

You should, of course, reassure staff that there will be no immediate changes. Devising a way of updating them as new information becomes available will be crucial. However you do it, you should never include speculation or opinion, especially political. You do need to act immediately whenever some new development hits the news and social media.

The fastest way will be available to a business with an intranet which can have a page devoted to these developments. Notice boards can set them out as well, or you could have regular meetings. Your local bookkeepers may be able to suggest various other ways of cascading the information swiftly through the organisation.

Holiday Pay Must Include Results Based Commission Says New Ruling

While the business community awaits the results of the Brexit deliberations of the UK government, of course, EU Law continues to influence the rulings of UK judges. A recent judgement in the Court of Appeal could have serious implications for any business that has employees on commission schemes.

A Claim for Wrongly Calculated Holiday Pay

A sales person employed by British Gas had claimed that his holiday pay had been wrongly calculated because it did not include an amount for commission that he would have earned if he had worked during the period of his holiday. Normally his commission represented about 60% of his income so the holiday pay was considerably short of his normal take home pay.

The case had earlier gone to the European Court of Justice which had rejected the claim by British Gas that his holiday pay was comparable to his normal earnings. The court reached this conclusion even though the commission scheme document was separate and not included in the employee’s contract of employment. EU case law requires holiday pay to include “all elements of normal pay”. 

When the employer took the case to the Court of Appeal, their lordships considered whether the UK Working Time Regulations 1998 should take account of this EU case law, and concluded that it should. The worker’s results-based commission was an element of his normal pay and should therefore be included in his holiday pay calculation.

The Financial Implications

Unless this ruling can be overturned, most of the British Gas 1000 plus sales staff could bring similar claims, resulting in a serious number of back payments from the company. Future holiday pay calculations will have to be correctly made to include amounts for normal commission even though they cannot be earned while their recipients are not working.

Small businesses are not exempt from this ruling and all organisations operating commission schemes should take note. However it doesn’t apply to other incentive schemes such as discretionary bonuses based on a high level of the performance of teams or on individual achievement. It could be worth discussing the matter with your local bookkeepers to ensure that you reward your employees in ways that are appropriate and will not adversely affect your bottom line.

How to Patent Your Invention

If you believe an idea or invention you are working on will take off and be valuable to you, you need to protect it as your intellectual property. The way to do this might be via trademarks, design rights or binding non-disclosure agreements or you might decide to apply for a patent.

If you choose to go down the patent route, the sooner you begin the better, because it can be a long, drawn-out process. You would be wise to take on a patent agent so that you won’t make any mistakes in this process, which would be time-consuming and even more expensive than the average spend of around £5000 on an application.

The Process of Gaining a UK Patent

Initially, you must acquire an application form from the patent office, to be submitted with your full name and address, and a description of the product you wish to patent. Then you will have up to 12 months from the filing date of your application in which it will remain valid and you can continue. While this may seem a long time, you may need it for fine tuning and making manufacturing arrangements; even setting up the funding you need can take a while.

Your application can only go through to the next stage if you pay the search fee and file claims that properly define your invention. At this stage, a Patent Officer will search for anything similar that might be available to ascertain whether it is truly unique. The product must also be something that is new, useful and non-obvious. After that you can publish your application and all the technical details of the product.

The Patent Office then conducts a full examination with the benefit of the results of the search. If everything is satisfactory, you will be granted your patent. It might be four to five years from your initial application.

How the Patent Protects your Invention

Your patent will be granted in this country for a limited number of years, provided that you make the required regular payments to maintain it. It will make it illegal during that time for anyone else to make, sell or import the product, or copies of it. If anyone infringes the patent, you can bring a civil law suit against them, get an injunction to stop them, and claim compensation.

What your patent will not do is make money from the product. If the invention won’t do that for you there is little point in patenting it. If you want to talk this through with someone independent who won’t give away your intellectual property secrets, why not discuss it in the first instance with your local bookkeepers. Sometimes a listening ear is all that is needed, or they may be able to recommend someone who will help.

How to Deal with Reference Requests

When an employee gives you notice that they will be leaving at the end of the term specified in their contract of employment, you know that they will probably be requesting that you give them a written reference to pass to their new employer. You may also receive reference requests for past employees from their new employer.

You may think this is a perfectly natural request that you can easily fulfil, but there are some pitfalls to be avoided, as well as legal implications. Occasionally you may get such a request from a landlord or a bank considering issuing a loan or setting up a new account. Apart from a few exceptions in specific industries, you are not obliged in law to give references and are free to have a policy of not doing so. In this way you cannot be accused of unfair treatment of an individual if you refuse to give them a reference.

Wanting to be Helpful

However, you may prefer to be helpful to employees wishing to move forward with their careers by writing a reference for them. If you do so, make sure it is fair and accurate. Otherwise, if the impression you give is misleading in any way, you could be in trouble down the line. You can include a disclaimer of liability for any errors, but this would not always help if a former or current employee or someone else decides to take legal action.

Getting Agreement from the Employee

You must never issue a reference to a third party unless the employee has agreed. This is because it will inevitably contain some personal information and details the individual may wish to withhold. You could be in breach of the Data Protection Act if you release this information without the consent of the person concerned.

If the reference request enquires about the mental and/or physical health of the individual, you also need to get their explicit consent to divulge it. It’s best to get this in writing as evidence in case it should be needed later. Even if you are asked to state a number of absence days without giving reasons for it, you risk a claim for disability discrimination.

Sometimes an employee with whom you have been in dispute will have made a settlement agreement with you, and it may have set out the wording for a reference to be given.

Finally, your local bookkeepers would advise you that it is usually wise to send a reference to a specific addressee, rather than ‘to whom it may concern’. If it were to fall into unscrupulous hands there could be further trouble for you.

Insurance Act Now in Force, What Businesses Need to Know

The Insurance Act 2015 came into force on 12 August 2016. It is intended to make for a fairer balance of interests between the insured and the insurer.

Applying mainly to non-consumer policies where the insured is an organisation rather than an individual, it extends the requirements of the Consumer Insurance (Disclosure and Representations) Act 2012 even further by ordering that you have a duty of disclosure of material circumstances that you know, plus what you ought to know. At the very least you must declare enough information to let the insurers know they need to make their own enquiries.

What you Need to Know

This means you need to make efforts to find out all the possible risks that you need to disclose, and you should keep comprehensive records of this research, what it has revealed and where you acquired it. Often the knowledge you need doesn’t lie with just one person. Any member of your senior management team may be privy to it, also your risk managers and anyone else responsible for the company’s insurance, including external sources such as an insurance broker. To a lesser extent, this applies to individuals as well.

Disclosures must be clear, structured and relevant. You can’t just dump a load of documents on the insurers for them to sift through and find what is pertinent. Unless your presentation is indexed and signposted in a coherent structure, it will not be considered adequate. Nor should it be too brief, vague or ambiguous, as is pointed out in the Explanatory notes to the Act.

Permitted Penalties of Non-compliance

If you fail to find out and disclose what you should have found out through diligent research, insurers can penalise you in specific ways. If anything is proven to be deliberately misrepresented, the insurer can avoid the policy so that it is ineffective. It is unlikely that you will receive a refund on your premium.

If the misrepresentation is found not to be deliberate, and you can produce evidence that you tried to ascertain the facts that have since come to light, the insurer has options based on the situation as follows:

·         If it can prove that the policy would not have been issued at all if the facts had been known at the time, it can avoid the policy and refuse the claims, but the premium must be repaid.

·         If the risk would have been accepted and a policy written with different terms, the contract should continue as if those terms were included.

·         If the premium would have been higher, claim settlements can be reduced by an appropriate proportion.

Complying with Warranties

Some insurance contracts depend on action that you agreed to undertake at the time they were written, such as changing or adding locks or alarms. The law regarding non-compliance on this has now changed so that insurers can no longer cancel the policy completely and avoid any claims, but only suspend the policy when the breach of the warranty is discovered until you fulfil the requirements. You will then still be insured under the same policy. It will, of course, be advisable to document proof of compliance with the warranty with relevant dates noted.

Wise small business owners will want to be confident that they have the right evidence in place regarding both their disclosures and their warranties. You can always turn to your local bookkeepers for help on these issues. They will be delighted to give you the benefit of their experience with helpful advice and support.

New Immigration Act Rules Now in Force

On 12 July 2016 new legislation on employing illegal workers came into force. According to the Immigration Act 2016, if a worker is found to be in the UK illegally, the government no longer has to prove that the employer knew about it. If this were to happen in your business, you could be prosecuted if you had ‘reasonable cause to believe that the employee is disqualified from employment’ because of being in the country illegally.

New Powers and Penalties

The Act also gives Immigration Officers the power to search your premises, and seize any incriminating evidence of this kind of wrong doing. It doesn’t matter whether the work is being performed under a written contract or just an oral one; the offence of employing an illegal immigrant is the same.

Penalties are more severe as well. Fines are heavy and you could go to prison for up to five years. Previously the maximum custodial sentence was two years. The workers themselves can now be prosecuted as well, and face imprisonment for up to six months.

Enforcing Worker Standards

The Act is also concerned about the conditions of legally employed workers. A new post of Director of Labour Market Enforcement has been created, whose role is to oversee the enforcement of the national minimum wage and other minimum standards for workers.

With all these new rules upon us, all employers need to be even more vigilant with their recruiting practices. If you are not 100% certain of their legal status, it’s not worth taking them on.

What Else Is to Come?

Other aspects of the Act have yet to come into force, and have no projected date as yet, but are worth noting and looking out for.

These are:

·         A power to close down premises for a maximum of 48 hours if illegal immigrants are found working there

·         A new rule that public sector workers who deal directly with the public must be fluent in English. In Wales the rule also includes the Welsh language

·         An immigration skills charge which will be imposed on employers who sponsor Tier 2 skilled migrant workers i.e. if you want to offer a job to someone from overseas with skills you cannot find otherwise.

You might want to ask your local bookkeepers to watch out for the enforcement dates of those regulations to come. They will be delighted to help keep you up to date.

Carrying Over Annual Leave – What you Need to Know as an Employer

As an employer you will be aware that you are obliged to give your staff 5.6 weeks annual leave, or the appropriate proportion of that for part-time personnel. You can, of course, offer more than that if you want to offer a really attractive contract and compete with other companies to gain and retain a loyal and motivated team.

More Complicated Aspects

As an entrepreneur who has to cover all bases, you may find the rules on when annual leave can be carried over from one year to another somewhat fuzzy and a level of detail too far – until a situation arises when you need to know.

Did you know that only 1.6 weeks of annual leave can be carried over at your discretion, and written into the employment contract, and why that is the case? This is because that 1.6 weeks has nothing to do with EU rules. It is awarded under UK law which allows it to be carried over.

The other 4 weeks, or 28 days, are awarded under the EU’s Working Time Regulations 1998, and they cannot be carried over under normal circumstances. If you offer additional contractual leave, you need to make it clear in the written contact whether you allow this leave to be carried over.

The Out of the Ordinary

Sometimes of course, there are exceptional circumstances why annual leave cannot be taken before the end of the leave year. The most common of these is sickness. If someone develops a serious illness or has an accident that means they have to take sick leave, they may not be able to take their annual leave in time but be in need of it at a later date. In a number of court cases applying EU law, employees have been allowed to take some or all of their EU leave from a previous year.

Other exceptional circumstances can arise because of the nature of the work and whether other staff members are available, as well as the personal circumstances of the personnel concerned. Your policy on carrying over contractual leave in these kind of circumstances should be made clear in your employment contracts, otherwise it will be necessary to have a written agreement signed by yourself and the employee for each individual occasion.

While you have a certain amount of leeway in your policies on taking leave in exceptional circumstances, it is important to know the rules of law. Clearly you would be wise to write all your leave policies into your staff contracts, so that no-one can claim to be unfairly treated and everyone knows where they stand. If you are not sure you have covered everything, your local bookkeepers would be happy to take a look at the draft and give you their opinion.

How Flexible Working Makes Businesses Attractive to Employees

When you are considering the type of people you want to join your business, and how to attract them, you would do well to look at your working practices, especially if you are competing for a small pool of good people.

How to Get them on Board

Naturally you demonstrate your own passion for what you are doing and hope to motivate the same in them. Alongside this, and the attractive pay package, sits the way you operate and will expect them to perform.

Recent research by Regus, the major international player in business services, indicates the need to offer flexible working conditions to attract and retain the best personnel. Of their survey of 3,000 professionals, 90% said that if everything else about two positions was equal, they would go for the one that had the most flexible working options.

Richard Morris, Chief Executive of Regus UK, said that these days flexibility is not looked on as a perk – it is seen as more of a right. It has become “a key differentiator for talented individuals”.

The Retention Factor

Almost a third of respondents in the survey also said they would not have left their previous position when they did if working hours and conditions had been more flexible. Clearly, if you value your people, it would pay to make their workplace setup and hours as flexible as possible. Entrepreneurs need to have hard working people they can trust to remain in place or progress through the business. You don’t need the expense and hassle of the recruitment process every year.

According to Richard Morris, “A flexible role is one where the individual has more control over where and when they are productive. Managers must get better at measuring on results rather than on time spent at a specified desk … There is also the current business climate to consider. The economic uncertainty requires business to be more agile and nimble so operating with a fluid and flexible workforce, using available workspace, makes real commercial sense…”

If you think it’s time to make changes to accommodate all this, you could discuss it with your local bookkeepers. They will most likely have experienced a variety of ways in which companies have made flexible conditions work for them, so they can warn you of pitfalls and advise on how to avoid or negotiate them.

How to Deal with Bank Holidays and Part Time Workers

Under the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000, it is illegal to treat any workers differently from their colleagues, and this applies as much to how leave is allowed and paid as to anything else. All employees must have at least the minimum annual leave entitlement. For those working a five day week or more, this is 28 days a year. Those working fewer days or hours must be given the appropriate proportion of this amount.

What About Bank Holidays?

You can choose to include these within this annual leave entitlement or give them additionally. If you do the former, everything is straightforward. The employee is paid for a normal week or month. It makes no difference whether or not they normally work on the day of the week on which the bank holiday falls. But suppose you are like the majority of employers who give additional leave for bank holidays; how do you calculate the payment they are due?

Calculating How Much you Should Pay

The way to do it is to work out the number of hours you need to pay them for, much as you calculate the amount annual leave they should have. If your working week is 35 hours, the hours of a normal years’ eight Bank Holidays is eight times the hours of a working day, which equals 56. For a part timer working 3 full days (21 hours), the hours they should be paid for bank holidays are calculated in this way:

21 divided by 35 x 56 = 33.6

Divide this total by eight and you get 4.2. If the rate of pay is £10 an hour the payment for a bank holiday day is £42 gross instead of £70 for a full time worker on the same hourly rate. To ensure full parity with full time workers, you would be wise to pay this amount whether or not the worker would otherwise have been at work on the bank holiday.

Keeping Within the Law

While human resources personnel should have no problem with these calculations, entrepreneurs who have a myriad of details to cope with may find it confusing. Getting help from your local bookkeepers could ensure you stay within the law and keep your staff happy and loyal.

New Tax Rules Affecting Company Distributions

In previous years it has been financially advantageous for business owners and directors to take a small salary during the year, and take a lump sum dividend at its end. This is because the rates of dividend tax have been much less than the rates of income tax. From 6 April 2016, however, this changed and dividend tax has been raised.

The first £5,000 is tax free, at zero rate. After that the basic rate amount is taxed at 7.5%, but the higher rate tax amount is 32.5% and for the additional rate it is 38.1%. So there is now much less advantage in taking high dividends instead of salary.

Government Concerns About Taking Capital on Winding up

Capital gains tax is also much less than income tax and now is less than both income and dividend tax. The maximum is 28% but it can be as little as 10% if an individual is eligible for entrepreneurs’ relief.

It is therefore tempting to take as much as possible as capital, which you might be able to do on winding up a company. But the government is wise to this and has set up new rules designed to discourage it. In certain circumstances they will tax such a distribution as income tax.

What Are Those Circumstances?

Firstly, the rule will apply if you are classed as a closed company, ie. one which only has up to five shareholders, or where the directors have full control of the company. Secondly, it will apply if a shareholder is paid capital from surplus reserves following a winding up, but they are involved with a new company set up for the same purpose within two years. When this is discovered the individual will be billed for extra tax, probably plus penalties.

The government takes a dim view of companies dissolved with new ones set up just to avoid higher rates of tax. They will always charge income tax on capital extracted in such circumstances.

What About Deliberately Retained Profits?

The practice of retaining profits instead of issuing dividends, so that they can be taken later as capital on winding up, has also been nipped in the bud. In future it will be penalised so you need to have a good reason for retaining profits.

Beware any tax adviser who recommends these dodgy tax avoidance schemes. Your local bookkeepers can assist you to stay within the law. They will also help you to document any legitimate reasons for retaining profits and to keep adequate records in case there are queries from HMRC. 

What you Need to Know About the New Confirmation Statement

If you own or are with a company that normally submits an annual return to Companies House, since 30 June 2016, you can no longer do this. Instead you must file a Confirmation Statement no later than 14 days after the anniversary of your last review date. This grace period is reduced from the 28 days previously allowed for the annual return. If you set up a new company, the first Confirmation Statement filing will be due one year after the date of incorporation, together with your first People with Significant Control (PSC) Register.

Failure to comply could mean prosecution for yourself and any other directors or officers of the business as well as the company itself. Late filing can carry severe financial penalties.

How to Submit

The Confirmation Statement is filed on form CS01 which consists of 62 pages, but it will only be necessary to complete it all the first time. The pages cover the company details; the date the confirmation is due, the business activities; the statement of capital held; the trading status of its shares and shareholder information; and details about PSCs. Confirming all this information assists Companies House to keep the public register up to date.

The Confirmation Statement is to be filed each year, following the due date, with a payment that is currently £13 for online filing or £40 if you send it by post. You can send in changes as they occur during the year without any additional payment. When the confirmation date comes round again, you need to check whether any further changes need to be made.

What to Check

These changes might be to:

• Company directors – any new appointments or terminations or changes in personal details
• The Company Secretary or registered office
• Shareholder information
• The SIC code or changes to the business activities
• Information in the PSC register
• Previously reported statement of capital
• Where the statutory books are kept 

This second and future statements will be made on a 2 page document that confirms or amends these details. It’s not a good idea to file early, because this will adjust the next due date to 12 months from this filing.

After the first Confirmation Statement, this should be a simple chore, but it must not be forgotten. Your local bookkeepers will be happy to remind you to get your filing done at the right time and to assist with all the submissions.

All you Need to Know About Secondments

Have you ever thought about taking on a secondee from another business? A secondment can be particularly useful when there is a need for temporary help, perhaps to get you through a particularly busy period or to cover another staff member’s maternity or parental leave, or long term sickness. Would it be a good idea to second one of your staff members elsewhere to help someone out, or to acquire skills that would be useful in your own business?

Why Second Someone?

These are all good reasons for secondments, but for you there could be other advantages as well. If you’d like to get a closer business relationship with the other organisation, offering a secondee could be a good start. For your personnel, it might be a really good career move that will enhance their CVs, so it could be a great way to reward them for loyalty and hard work.

Perhaps a member of staff has gone a bit stale and is thinking of moving on; you don’t want to lose them in the long-term, so hope that a secondment elsewhere could freshen up their working day. They might come back full of new ideas and enthusiastic to make them work.

If you have been going through a bad patch and think you might have to make one or two members of staff redundant, you could send them on a secondment for a time. Things could be better by the end of it. You will still have the responsibility to pay their salary, but will recover this and more from the companies that receive them.

Why Take on a Secondee?

It can be a great way to avoid all the hassle and cost of recruiting someone new. Sometimes you just need an extra pair of hands for a while. Taking on a secondee with skills not present in your team is another advantage, especially if he or she can pass those skills on while they are with you.

What are the Downsides?

Of course there are, as always, some pitfalls to avoid. The first may be concerns about confidentiality on both sides, so measures must be taken to avoid the passing on of sensitive business information. This can be solved with relevant clauses written into an agreement between all parties.

Another thing that might make you anxious if you let someone take up a secondment is that they might not want to return, but be taken on by the other company. Again, a well thought out and carefully written secondment agreement can restrict employment of the secondee by the host company for a period of time once the secondment comes to an end.

If you are still not sure about all this, your local bookkeepers may have experience of what is needed in secondment agreements, and be happy to discuss it with you. They might also be able to introduce you to professionals who could help if you feel this is needed. The Chartered Institute of Personnel and Development also offers fact sheets aboutsecondments on its website.

Common Misconceptions About Claiming VAT Back

When you are completing your VAT return and claiming back VAT you have paid on purchases, it should be a simple job that is easily completed. But it is also easy to get things wrong without even knowing. Some of the rules are complicated and unfortunately, ignorance is no defence if HMRC pick up your mistakes. They can, and will, impose heavy penalties.

Rules not Widely Known

Did you reclaim the VAT on your company car when you bought it? If you use it to ferry the kids to school on your way to the office, and pick up the groceries on the way home, that means it is partly for private use. Even the commute to work is private use. Only the VAT on cars used solely for business purposes, insured as such and kept at the business premises, is reclaimable.

On the other hand, you can reclaim the VAT if you buy mobile devices for your staff. If they are then used for personal reasons as well as business use, you can only reclaim the VAT element of the cost of the business use. However, if you make a nominal regular charge to the staff member who has an iPad or laptop, you are technically leasing it, which is business use, so all the VAT can be reclaimed.

Of course, you keep all your bills for the requisite number of years. Have you ever received an invoice that didn’t show the VAT separately? Did you check whether the items purchased were VAT-able, and at what rate? If 20% VAT was due, how did you calculate the amount that you could claim back? You should have multiplied it by a sixth to come to the figure that HMRC will accept.

When Can you Reclaim VAT on Entertaining Costs

If you want to treat your loyal customers, or host a networking meeting, this is classed as entertaining third parties, for which VAT is not reclaimable. If some of your staff also attend, you may be able to reclaim a proportion of the VAT. Treating your staff to a summer outing or a Christmas party is a different matter. Staff entertainment is eligible to be added to your VAT return in the claiming section.

The government website has a whole section on VAT. To find out more about the rules on reclaiming, go to this page and follow the relevant links. Your local bookkeepers will also be a mine of information on VAT matters, so you would be wise to discuss any concerns you have with them.

Why the Human Touch is Still so Crucial in Customer Service

‘Press one for x, press two for xx, three for xxx, four to talk to one of our customer service representatives.’ How many times have you fumed through this scenario and breathed a sigh of relief when you heard the final option? Why do you occasionally see companies proudly announcing that you will always talk to a person when you call them? Doesn’t it make you feel good when you enter a shop and a member of staff steps up to welcome you in with a beaming smile?

Customers Like the Personal Touch

There’s no doubt about it. Even a live chat option online can relieve frustration and make a customer more inclined to do some business. Not only is it good for business, it’s good for staff too to have satisfying human interaction during their working day. Provided they are properly trained and know what they are doing, it makes for more job satisfaction and a loyal workforce.

What Skills are Needed?

Staff members need to be patient and friendly, to listen carefully to any customer concerns and be able to satisfy them. They should know as much as possible about your products and services, but also know their limitations and when to hand a customer over to someone better qualified to help.

The most helpful thing they can do is diffuse a difficult situation. Someone with the ability to calm down irate customers and satisfy them, so that they leave the premises or the phone call with no ill feelings, is worth their weight in gold for potentially rescuing the business reputation.

The Economics of Customer Service

Of course it makes sense to cut costs and remain competitive with automated services in some areas, like simple on-line transactions and bill payments. However, it is clear that it is still crucial to maintain the human touch in many others. Research has shown that giving people positive and stress free interactions by phone and in person induces feelings of trust and reassurance and makes them loyal and ready to come back for more.

If you are getting repeat business and a growing following through word of mouth, you won’t need to throw extra resources into crisis marketing. Why not discuss these elements with your local bookkeepers before you decide where to spend your assets on consolidating and growing your business.

A Guide to Employing Executive Staff

In a small business, hiring your first member of staff is an important step which some first time entrepreneurs approach with trepidation. Once that first time is under your belt you become more confident, and might even get blasé about. But how much more difficult it is when you want to bring in a number two or a finance or marketing director. You want people with skills to complement your own, and you may be way out of your comfort zone.

The Planning Stage

Because these are crucial roles, you need to get it right from the word go. It’s therefore important to plan how to go about the recruitment process, know what you want to find out and how you will approach it well before you start.

First you need a succinct job description, so take your time over it if at all possible. Before you finalise it, do some networking. Talk to other people who do the hiring as well as people who have been hired for the type of role you have in mind. Now you can advertise the post.

Selecting the Right Applicants

Your first experience of those who respond might be on the telephone, or more likely on paper. This will be either a CV or information from a recruitment agency. Again this stage should not be rushed as you need time to peruse and consider all the detail in front of you. Which candidates have the skills, training and experience you believe will equip them for the role? When you decide on the ones you will interview, make notes for each person to help you to probe further into what you have read.

The Interview Stages

At the first interviews you have to make judgements about whether they can do the job as well as you need. Lead them into discussing what they can bring to the role. You need to be sure that their skills will be a good fit.

From the discussion, is it clear they have done some homework to find out about you and your company? That could demonstrate the level of commitment you want. Now consider their personality. Will they fit in well with your team? Do they have the right balance of authority and willingness to listen and learn? Do you actually like them?

Sometimes there is a clear winner at this stage, but you may find you still have more than one possibility. If so, you should invite them back for another interview. You could set them a task or some homework to do in the meantime.

You could always bring a second person to join you for the interviews, if you have someone appropriate whose judgement you can rely on. It doesn’t have to be an inside person. It could be a spouse or a mentor or friend, perhaps someone from your local bookkeepers. The final decision, of course, will still lie with you, but you will have the view of someone else to help you make it.

The ‘Gig Economy’ – a Guide for Employers

A new buzzword in the business world is the ‘gig economy’, but do you know for sure what it means? Some people think it just refers to being able to use websites such as People per Hour where you place your bid for services offered. Others give it a much wider application as if it refers to using any freelancers for specific projects.

Gig workers may be used at any level of an organisation. Alex Swarbrick is a senior consultant at Roffey Park, an institute which claims to ‘develop people who develop organisations’. He believes that gig workers fall into two distinct groups.

“You can characterise the workforce in this model like an hourglass,” he says. “So the people at the top comprise highly-skilled, sought-after talent that is relatively well paid and expects to work flexibly. Workers at the bottom end of the hourglass, however, are likely to be on temporary, fixed-term, zero-hour contracts and have a number of jobs that could be characterised as insecure, low-paid work.”

How Can you Get the Best People to Give Value for Money?

Entrepreneurs frequently use freelancers when they need help temporarily, so are probably more used to avoiding the pitfalls than many a large HR department. Sometimes though, they can still be managed more effectively whatever the size of your business. So here are some aspects to deal with that you may not have considered before:

• What will attract the right gig workers to be available for you if at all possible when you need them? Having relevant contract terms and conditions, rewards and benefits will go a long way to making yourself an attractive employer.
• Staying in touch with people you will want to come back for future projects and keeping them in the loop as much as you can.
• Managing the risks of using people who might also work for your competitors from time to time.
• Keeping tabs on quality control to get the best value from outsourced workers.
• Making sure they are aware of all relevant legislation and operate within the law.
• Integrating them comfortably with any permanent staff you have. The last thing you want is any resentment on either side. 

How Can you Keep all Staff Happy?

Co-operation between permanent and temporary staff is essential so you must do all you can to ensure it. It’s worth remembering that even workers of longstanding can become bored and unproductive unless they have a bit of variety in their days, and operate in a culture of give as well as take.

Bearing all this in mind, you should have no problem in getting the most advantage from the gig economy. Your local bookkeepers will be glad to advise and assist if you need help with contracts or managing the finances. They might also have the contacts to help you find the best people for a particular job.

Time to Update Your Display Screen Equipment Risk Assessments

Pretty well any time you buy new business equipment, you need to produce a new risk assessment. Work stations, which comprise equipment such as desks, chairs, monitors and other display screens, are no exception.

Changes in Screen Technology

Display screen equipment has seen exceptional technological development in recent years. Gone are the fat, bulky monitors that used to adorn our desks and take up so much space. Flat screens are the norm, and even these can mean change of posture for the users or more strain on the eyes because the screen is further back on the desk.

Stand-up desks have also been recommended by Public Health England, because it’s not so good for people to sit at a desk for a whole day, as many workers have been used to doing. Desks can be at variable heights these days, and how they should be used is important for your well-being and productivity, and that of your staff.

In some fields it’s common to have wide format screens, with a number of applications on show at the same time. Similarly, people can work with multiple screens, but they have to be further from them so they can see everything without having to keep turning around. How might that affect the eyes, or put greater strain on the neck or back?

Changes in Communication Technology

Laptops are also a feature of the modern office, but they can be much more difficult to use comfortably over long periods of time. Your risk assessments will need to cover how to mitigate the problems with connected keyboards and mice; you can even connect a larger separate display screen if it helps.

Do you allow your staff to bring their own devices to use at work? Perhaps you supply them with a mobile or a tablet for personal as well as business use. When you use a touch screen device, you are just as much at risk of repetitive strain injury as anyone using a keyboard.

If your risk assessments don’t take all these eventualities on board, it’s high time to review and update them. If you need help for this, your local bookkeepers may be able to assist, or point you towards appropriate professional help.

Shared Parental Leave – the Story so Far

One year after the introduction of shared parental leave for parents of babies born on or after 1 April 2014, surveys on take-up were undertaken. Reports in the press declared it to be very poor, but it seems they got the wrong end of the stick.

What the Surveys Said

My Family Care and the Women’s Business Council questioned HR directors from 200 companies and found that around 1% of men had requested and been granted shared parental leave. But this was a percentage of all men employed, and only 10% of both the men and women employed had had a baby since April 2015. In fact, 24% of these women and 30% of the men who were new parents had taken shared parental leave.

In another survey by Totaljobs, out of 628 respondents, 86 became parents in the qualifying time. Among these, 21% were ineligible to take shared parental leave, while 31% took it. In both cases, this was considerably more than was reported in the press.

Are the Surveys Representative?

However, Mark Crail, content director at XpertHR, said the research should be taken with a pinch of salt. Not only were the samples particularly small, there were other factors to be taken into consideration.

“If the 30% figures are correct then take-up has been higher than expected – it’s good news, not the shock-horror story that much of the media has been running about these research findings,” he said. “The problem is many employers simply will not know whether or not men are eligible for shared parental leave unless and until they apply. If someone’s partner has a baby and they choose not to tell their employer, they won’t show up in the records. That makes it extremely difficult to get a good overview of what’s really happening.”

Why Parents Don’t Apply

There are clearly still barriers to taking shared parental leave. Many people just can’t afford it, especially if their employers are unwilling or unable to top up the statutory pay awarded. Among men, the culture of their organisation may discourage it, and both men and women are sometimes fearful that their careers would suffer. Some women and men said that they believed that women prefer to be the main carer of their children. A lack of awareness about shared parental leave also seems to be a problem.

In small businesses, shared parental leave may be seen as yet another burden for the employer and affordability is bound to be a problem. If you have any questions about shared parental leave for your staff, your local bookkeepers will be happy to advise you.