Royal Mail Survival Plan: a Threat to Small Businesses

What would happen to your business if your mailing and shipping costs rose by around 50%? That is what might happen this April if Royal Mail and Ofcom have their way. Their proposals are to put up 2nd class post possibly to as much as 55p, and to have no price limits set for various other services, such as:

· 1st class letters, large letters and packets
· 2nd class deliveries of large letter and packets
· Standard parcels
· Business mail in metered, franked or prepaid envelopes.

How to Avoid More Heavy Royal Mail Losses

In the last year, Royal Mail delivered 16 billion letters to around 28 million addresses, yet still lost £120 million. This is attributed to a decline in the use of postal services as people communicate in different ways using new technology. In 2010, the Hooper Report on the postal sector concluded that the volume of post will continue to lower and by 2015 Royal Mail could lose up to 40% of its business.

Ofcom, which took over the regulation of Royal Mail from Postcomm last October, has been conducting a public consultation on how to give more commercial freedom to the UK’s postal service while safeguarding the universal postal service for consumers. The results will shortly be published, after which Royal Mail will publish its stamp prices from April 2012.

Ofcom is charged with policing the Universal Service Obligation placed on Royal Mail to collect and deliver letters six days a week an packets five days a week, at affordable rate to every UK address. The regulator also monitors the performance standards of 93% of 1st class mail arriving the next day and 98.5% of 2nd class mail being delivered by the third day following posting.

Clearly Royal Mail cannot continue to sustain the losses while maintaining the performance required without some drastic changes.

The Effect on Small Businesses

Royal Mail is also currently required to offer its competitors – the likes of UK Mail, TNT, DHL – access to its delivery network, at a price which is subject to rules set and monitored by Ofcom. If Royal Mail prices rise, they will probably have to follow suit.

For businesses that rely on the post to deliver goods, their costs will rise exorbitantly, as will those of sending out invoices and promotional material. The Forum of Private Business is campaigning against the price rises which will add yet another burden to businesses in these difficult times.

You would be wise to consider how this will affect your business. As your outsourced bookkeepers, we would be happy to help you work out alternative cash flow projections for the eventuality, so that you can consider where you can make changes to accommodate the additional costs.

New Pension Regulation Dates Postponed

Small business managers have had one onerous burden reduced by the government, which has now decided to revise the dates by which the auto-enrolment pension process for all staff must be commenced and completed. If you haven’t yet managed to start planning for these pension reforms, you’ll be relieved to hear that you may have up to two extra years to prepare and complete the enrolment of your eligible staff.

Higher Contributions to be Phased in

The original announcement that employers’ initial minimum contributions of 1% would quickly rise to 2% and then 3% caused some consternation, to which the government has also responded. The hike to 2% is to be delayed by one year, from October 2016 to 2017, and the further rise to a minimum of 3% will not be enforced until October 2018. The percentage applies to qualifying earnings of between £5,035 and £33,540.

Changes in Staging Dates

Your staging date is the date by which you should have your pension scheme in place and be able to start the auto-enrolment process. As long as you have fewer than 50 people in your PAYE scheme on 1 April 2012, your staging date will not be before June 2015. Then you will have until April 2017 to complete the process for all eligible staff members. If you set up a new business after April, you will have until April 2018 to get everyone enrolled.

Dates are also changed for employers with between 50 and 249 people on their payroll. Larger payroll companies already have dates between 1 October 2012 and 1 February 2014, which are not affected by the changes. As with the smaller companies, the dates are allocated according to the numbers on the payroll at April 1st.

You should be informed of your staging date by the DWP. If you want to check it ahead of that, you may be able to look it up on tables on the Pensions Regulator website, once they have all been updated, but in case of changes to your staff complement, you might as well wait until April, otherwise you might have to check it again.

The Learning Curve for Businesses

According to Steve Weeks, the Minister for Pensions, the government has now done all it can to ease the burden of pension reform on the business world. There is, however, pressure for a campaign to educate businesses on what they have to do when. If you are or will be an employer, you will have to select an appropriate pension scheme and do some financial planning. Your outsourced bookkeepers should be able to advise and help you.

Join the British Library for Free Business Advice

Ever thought of going to the British Library to do some market research? Since 2006, when it launched its Business and IP Centre, it has been an ideal venue for business information for entrepreneurs with easy access to London. The centre was set up to support and assist them right through from the spark of an idea, to setting up a business and developing it through successful growth.

Free to Access

All you need to do is turn up with documented proof of your address and your signature and request a reader pass which gives you access to all the library services, including the Business and IP Centre. You don’t even need this to book and attend a workshop, but you would need it to access the research and other facilities.

The Registration Office, where you can get your reader pass, is on the upper ground floor of the building, and the Business and IP Centre can be found on the first floor.

Services Available

For your research, the centre holds a vast collection of databases and publications that give comprehensive coverage of topics that might be needed. Staff members are at hand to help you through the maze of information to find what you seek as quickly as possible.

Networking events can be used to meet like-minded people and develop business opportunities. You can even hold follow up and other meetings in the library.

You can also arrange one-to-one sessions with successful business people who can offer advice gleaned from their own experience.

The centre’s regular programme of workshops and seminars is free unless a small fee is required for a partner organisation to come in and run it.

The Web in Feb Programme

Through February 2012, a series of events has been planned with a focus on getting the most from a web presence with e-marketing and on-line trading. The Web in Feb programme includes workshops on search engine optimisation for the small business, effective business blogging, managing a web-based business, and using social media effectively. Costs vary from free events to the most expensive at £49.

The centre has also arranged for a patent lawyer to be available through the month for confidential one-to-one sessions about developing the necessary technology.

Whatever stage you are at with your business, it would be likely to benefit if you can make time for regular or occasional visits to the British Library.

Is your Business Prepared for Bad Weather?

In 2010, the serious snow and icy weather came before Christmas and many businesses were adversely affected. So far this winter we’ve had some bad storms but only a few areas have seen snow and ice. But it could still be on the way.

If it does arrive during the latter part of January or in February, will you and your staff be able to get to work? Will roads be passable? Will schools close so that parents need to be at home for their children? Will anyone suffer injuries in falls and have to take sick leave? How would you feel if that happened because of slippery conditions on or just outside your premises? Could your business survive having to close down for a period if power was cut or no-one could get there?

How can you prepare for all or any of those eventualities? And what is it all going to cost you?

Contracts, Policies and Regulations

What it will cost depends partly on the expenses of getting prepared, partly on how much business you lose, and partly on what you must pay your staff in a period of inactivity.

If you already have HR policies in place to deal with adverse weather conditions, you may just need to remind personnel about them via a notice board, your intranet or face to face meetings. They need to know who to contact if they can’t come in and how to get in contact if your landline isn’t working. Some staff may be able to work at home, or come in for fewer hours than normal. You should also have arrangements in place to contact all of them if you have to close down.

Preparation costs may include supplying equipment for home work, which will require funds and should be carefully considered to see if it will reduce the loss of business enough to be worthwhile. Other funds might be needed for stocking up on rock salt and paying people to make car parking and pathways safe and avoid nasty falls on your premises.

Unless contracts of employment state otherwise, regulations require you to pay staff members who are available for work while the reasons for non-attendance are outside their control. Anyone who must care for dependants at home is entitled to unpaid leave, and it is up to you whether you are prepared to pay them anything. They may be able to make up time over the next weeks, in which case you wouldn’t be out of pocket eventually and it could be a good gesture where morale and loyalty is concerned.

Checking Cashflow and Budgeting

Clearly you need to check your cashflow projections and prepare a budget for all this. Your outsourced bookkeepers are the ideal people to help you with that side of the preparation.

Get Your Personal Tax Return in on Time

Yes, the deadline is almost upon us. If your on-line tax return and payment doesn’t arrive at HMRC by January 31st, the initial penalty of £100 will be levied. Greater amounts will soon accrue and could add up to £1,300 over six months. And that doesn’t include the interest that will be added to the tax due. Clearly it makes sense to submit and pay on time.

Get Ready - and Go!

Hopefully, you are already registered with HMRC for on-line self- assessment. If not, get to it right away at http://www.hmrc.gov.uk/sa/. It will take a few days to receive the activation code you need to access your tax return.

Collect together all the information you need to complete your return, such as
· P60 or P45 (Part 1A)
· P11D or equivalent information from an employer
· Profit or loss accounts
· Records of business receipts and business expenses
· Letters received from the Department for Work and Pensions
· Notices of tax coding for 2010-11 and 2011-12
· Details of pension contributions or receipts
· Details of gift aid payments to charities.

You are now ready to start your submission, unless you need professional help with anything unusual that happened during that tax year. In that case, hopefully you have already accessed the help you need from your accountant or via your local bookkeepers.

When you click on submit your tax return, you will be guided through the HMRC software on the site. You don’t have to do it in one sitting. If you need to leave it, the software will save your data until you log on again.

Pay Attention to Accuracy

When you submit on-line, make sure you haven’t made any mistakes before clicking that submit button. Transposing numbers, such as 150 to 510, could make a significant difference to your tax liability. If you have a paper copy of the return from the revenue, it might help to fill that in so you can copy it on-line. If you do find an error after your return has been submitted, the revenue will allow you to resubmit an amended return, but only until January 31st.

Getting someone else to help you check it also makes good sense. An obvious choice for this, or to help in any way you want with the submission, would be your outsourced bookkeepers. Many of them, including Office Assistants, offer a far wider range of services than just keeping the books for you.

Bribery Act Sentencing a Real Deterrent

Earlier this year, we brought you the news that the new Bribery Act came into force on July 1st. Now we are able to report on the sentencing of the first case brought to the courts under the new Act.

On 18 November 2011, Munir Patel, a clerk at a magistrates’ court, received a 3 year prison sentence after pleading guilty to receiving a bribe of £500 in exchange for removing motoring offences from official records. He also received a concurrent 6 year sentence for misconduct in public office, since he had previously committed a number of similar offences that netted him in the region of £2,000. This was before he was filmed in a newspaper investigation pocketing the cash received from a motorist on 1 August 2010, after which he was prosecuted.

Will There be a Trend Towards Harsher Sentencing?

The sentence was something of a shock to the legal community since there have been earlier trials relating to bribery by international business people and overseas government officials where the sums of money involved have been significantly higher and the sentences much less severe. Speculation ranges from whether this was a response to calls for harsher punishment under the reformed legislation, to whether it was about a need to protect the English criminal justice system. Most arguments favour the former, and lead us to believe this sentence is meant to act as a deterrent to anyone considering any form of bribery.

The Onus on Business Chiefs

A business owner or director now has a responsibility to prevent bribery offences being committed in the name of the business. It is not enough to be squeaky clean yourself. If a member of your staff takes or accepts a bribe in the course of their work, perhaps to be awarded a contract, or to select a specific supplier, you could be prosecuted.

So what steps can you take to prevent this happening? It is important to have a written anti-bribery policy and procedures which are communicated to everyone. The procedures should include logging reports of any incidents that might be construed as attempted bribery by outsiders, or internal disciplinary activities to prevent bribery.

Some members of staff may be ignorant or unclear about what constitutes bribery, so training sessions to get the message across and reinforce it could be a good idea, and should also be noted on your log. If the worst were to happen, and someone from your organisation was prosecuted, you would at least have documented proof of your own anti-bribery activities.

A Taxing Christmas?

At this time of year, along with many other longstanding traditions, business owners like to reward their loyal staff with gifts, bonuses and parties. But don't forget that the tax man is also rubbing his hands together in anticipation of extra income for the Revenue. There are some rules to be aware of if you don't want to have extra tax or NI liabilities for the company or your staff.

Taxing Gifts

Small seasonal gifts can be treated as trivial for tax purposes. If you hand out a few Christmas turkeys or boxes of chocolates to members of staff, they won't incur a benefit in kind tax charge. But if you made your gift an expensive Christmas hamper or bottle of vintage champagne, it won't be seen as trivial, and the employee could be taxed on it.

Taxing Bonuses

You can't avoid the tax due on a Christmas bonus. It is of course included in annual income and therefore taxable at whatever bracket is appropriate for the individual. And whether 80% or 60% or 50% of it becomes disposable income, it's sure to be welcome. Of course, it will also have an impact on levels of national insurance for both the individual and the company, so that must also be included in the bonus budget.

Taxing Christmas Parties

The tax rules about annual functions cover the Christmas party. If Christmas is the only time you have a staff get-together, as long as your costs do not exceed £150 per head, no additional taxes will be charged.

Everything you spend, including VAT, on venue, food, drink, entertainment, and transport or accommodation, must be taken into account as a benefit for the staff member. If the total divided by the number of staff attendees works out at more than £150, unless you have a PAYE Settlement Agreement with the Revenue, your payroll operatives have to include it as a benefit in kind for tax purposes. For any employee whose earnings come to £8,500 or more in the year, or for any directors, your company must pay additional National Insurance as well.

If you also treated your staff to a summer barbecue and/or any other annual functions, and the amount per head of all the functions added together exceeds £150, the rules become quite complicated. If this is the case, you may need some expert advice on what tax is due.

Ask your outsourced bookkeepers to help you make sure you comply with the rules. With the current special scrutiny by HMRC on small businesses, it's important to get your tax affairs right this Christmas.