Banks Must Now Offer an Alternative to Businesses Turned Down for Finance

From 1^st November, it became a legal obligation for the UK’s nine major banks to refer any small to medium businesses who they have refused for finance to an alternative provider.

The Bank Referral Scheme

As part of the Small Business Enterprise and Employment Act 2015, the new bank referral scheme is aimed at making life for smaller sized businesses more straightforward through numerous changes, one of which being the bank referral scheme.

The scheme will mean that it is compulsory for banks to refer any small to medium business that they turn down for lending to an alternative finance platform. Three of these platforms have been pre-approved for referrals. They are: Funding Xchange, Business Finance Compared and Funding Options. Their job will be to put potential business borrowers in touch with alternative finance options.

By doing this, it’s hoped that by providing an easy access route and transparency it will aid growth in the UK, and has been hailed as ‘vital step’ in boosting the supply of business finance to small to medium businesses.

Half of First Time SME Borrowers Rejected for Finance

Before the scheme was put in place, the Department for Business, Innovation and Skills, which was replaced in July 2016 by the Department for Business, Energy and Industrial Strategy, reported that 50 percent of SMEs had been rejected for finance. In turn, this led to 37 percent cancelling their additional spending plans.

Indeed, The British Business Bank estimates that 100,000 small businesses are rejected for finance by banks each year; this is the equivalent to a £4 billion shortfall in business funding.

It is thought that only 3 percent of small to medium businesses that are rejected for funding go on to seek alternative finance sources, and it is therefore hoped that by offering the Bank Referral Scheme, a range of finance options will open up to the UK’s smaller businesses. After all, comparison sites are available for the likes of insurance, flights and credit cards, so why not business finance too? If you are seeking advice on funding for your small business, why not talk to your bookkeepers?

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.