How to Protect Yourself as a Director or Company Officer

Under the Companies Act 2006, directors and company officers are subject to over 200 areas of statutory liability. A breach of any legislation has the potential to lead to civil or even criminal charges. Directors and officers of companies can be held personally liable for these charges and could face significant fines and possible custodial sentences.

Regulatory compliance is an ever-growing challenge, and the powers of regulatory bodies are becoming increasingly onerous. Risks are also apparent in the workplace in the form of employees who are these days well aware of their rights and do not hold back in taking action where they feel those rights have been violated.

Keeping your head above water amidst all this is an exceptional challenge for any business owner, particularly when the business is a smaller one that doesn’t have its own in-house legal department.

Personal Risks for Company Directors and Officers

Directors and officers face a raft of personal risks. These include health and safety failings; employee claims; data protection breaches; advertising standards violations and company activity irregularities.

In some cases, convicted directors can face sentences of between two and ten years as well as being banned from running a company for up to 15 years.

Thankfully there is a way to protect yourself from these risks if you are a company director or officer.

How to Protect Yourself from Personal Risk as a Company Director or Officer

If an investigation is launched against your company you will obviously need to put up a solid defence. The legal costs involved in this can run into tens or hundreds of thousands of pounds, even if the outcome is favourable. This will obviously put a significant strain on both company and personal finances.

The way to protect against this risk is by taking out a Directors and Officers Liability insurance policy, also known as D&O insurance.

These policies take away the financial risks faced by directors and officers, protecting them in the event of claims or allegations needing to be defended.

D&O insurance provides cover for key officers and directors of a business, protecting them by covering legal defence costs in cases of regulatory inquiries; environmental mismanagement investigations; employee claims; licensing breach actions, corporate manslaughter allegations and more.

Most directors and officers taking up new positions have an expectation for such cover to be in place to protect them in their new role. This cover is not expensive and premiums are based on a sliding scale according to turnover.

If you think in terms of the potential costs involved in NOT having the cover, it has to be considered a wise move.

GDPR and Email Marketing

GDPR is big news at this present time. We recently covered the General Data Protection Regulation, setting out the three key areas in which businesses of all sizes and types that do business with any EU based consumer will need to ensure compliance.

One of these key areas was consent. If you regularly send email newsletters or updates to a contact list that resides within the EU, then you are going to need to follow a number of steps to make sure you are not breaching the new Regulation. Remember, a breach could cost you literally millions of pounds.

Email Marketing Requires Opt-In Consent Under GDPR

Under GDPR, businesses can only send emails to those who have opted in to receive them. Whilst the current EU Privacy Directive already requires this in the majority of EU countries, the difference under GDPR is the nature of the consent. 

Consent must never be compulsory or hidden; it must be active (opt-in only); you must have separate requests for each type of contact; it has to be clear who is requesting the consent, and the consent must be easy to withdraw. 

You cannot assume that it is permissible to send marketing materials to contacts who do not request NOT to be contacted.

Why are you Collecting Data?

Your reason for collecting data must also be made clear, and you must set out how it will be used. Again this needs to be a positive action (opt-in) rather than a negative opt-out action.

For example, saying something like, “Office Assistants will use your personal details and record your purchase habits so we can provide you with appropriate offers in the future. If you would prefer for us not to do this, please tick here.” This would be non-permissible under GDPR because you are asking for an opt-out rather than an opt-in.

“Please tick the box to confirm you are happy for us to do this” is the right way to obtain consent as this is a positive action.

 Every time you collect an email address you will need to run this procedure. It doesn’t matter whether it’s a web sign-up form, a postal mailshot, an exhibition or anything else, you MUST obtain consent to send marketing materials. Under GDPR you cannot collect, store or use email addresses without consent.

Record Keeping is Essential

You will also need to keep records of all consents collected because if compliance is questioned, you will need them as evidence. This could be done by keeping copies of sign-up forms or taking screen shops of web pages or apps where consent boxes were ticked.

GDPR will apply to all data captured both before and after the introduction of the Regulation on 25^th May 2018. This means that any current mailing list you have will need to be refreshed. In other words, you will need to request consent from every person on your existing mailing list.

When to Plan for GDPR?

The best time to do this is NOW. If you leave it until the last minute, your consent request email will be lost in the midst of everyone else’s who is undertaking the same exercise. It may also be necessary to send a series of requests in case there is a lack of response in the first instance. Give yourself time otherwise you could find yourself with an unusable mailing list come May next year.

If you are in any way unsure as to how GDPR will affect your business, why not speak to your local bookkeepers?

An Employer's Guide to Christmas

Christmas time is filled with doubts and concerns for the employer who tends to spend much of his or her time during the festive season run-up dealing with all sorts of issues such as annual leave requests, overtime grievances and disciplinary issues.

 

Now is a good time to prepare for the challenges that lie ahead and to help you we’ve summarised five of the most common problems faced by employers at this time of year, together with advice on how to deal with them.

1.     Social Events

 

Employers have a duty of care towards their workforce and the Equality Act makes employers liable for acts of harassment, victimisation and discrimination during the course of employment, although if evidence can be provided that reasonable steps were taken to prevent such acts then it may be possible to avert any action.

Action to take: ensure you have a set policy on workplace social events and evidence that it is enforced.

2.     Overtime

Providing your contracts of employment incorporate clauses that require employees to work overtime as and when required, then you can expect your staff to agree to overtime over the festive period. If they refuse then you will usually be within your rights to discipline them.

Action to take: check your contracts to ensure you have stipulated that your workers must undertake overtime during busy periods before attempting to enforce it.

3.     Annual Leave Requests

Many employees have a desire to take holidays during the festive period so they can spend time with their families. However, unless there is a contractual agreement, they are not within their rights to insist upon it and must provide notice equal to twice the length of the leave they are looking to take.

Employers are then able to put a counter notice forward stating that the leave has been refused, providing the counter notice matches the length of the leave requested and the staff member is not being prevented from taking leave they are entitled to within that holiday year. You’ll need to present valid reasons if you want to refuse an employee who has enough leave accrued and who has given reasonable notice.

Action to take: be clear on the annual leave allowances and policies you have incorporated into your workers’ contracts. Never refuse leave without valid reason.

4.     Late to Work

It is not uncommon for workers to turn up late the next day following the annual Christmas party. But what is the employer’s position?

Employers have a right to make deductions from workers’ pay if they are late to work, providing there is a clause in the employment contract allowing them to make deductions from wages for unauthorised absence.

Action to take: make sure your employment contracts include such a clause, and that your disciplinary policy states that non-attendance following any form of staff event could lead to disciplinary action.

5.     Annual Leave Requirements

For some businesses, the Christmas and New Year period is the ideal time to shut down and many employers require workers to reserve annual leave to take at this time of year.

As long as it is stipulated in the contract of employment, employers are able to stipulate when leave should be taken.

Action to take: ensure your contracts of employment and holiday policy stipulate any particular requirements you have concerning the need for staff to reserve a certain amount of their annual leave to cover the Christmas and New Year shut down period.

If you are in any way concerned about dealing with staff issues over the festive period, why not talk to your bookkeepers in the first instance? They’ll be able to set you straight on the key rules and, if necessary, refer you on for legal advice.

Autumn Budget 2017 Key Announcements for Small Businesses

For the small business owner there was a fair amount to digest following Chancellor Philip Hammond’s first Autumn Budget on 22 November. Here we provide an at-a-glance summary of the key points.

VAT Threshold

There were murmurings of a potential change to the VAT threshold, but this has remained at £85,000 for at least the next two years, most likely due to heavy opposition from small business organisations. The news has been welcomed by bodies such as the Federation of Small Businesses (FSB), which have been campaigning on the subject of VAT reform for some time, arguing that it has the potential to drain the resources of the smaller business. The stay could however be just a temporary measure, with a rumoured overhaul to the VAT system coming in 2020.

Business Rates

From April 2018 the Retail Price Index (RPI) will be replaced with the Consumer Price Index (CPI) with the CPI being used to calculate business rates. This should in practice save businesses quite significantly, with collective savings reckoned to be in the region of £2.3 billion over three years.

Staircase tax was abolished with a promise to business owners affected by it since it was introduced that their original rates bills would be reinstated. There was also an announcement that following the next business rates revaluation in 2022, such revaluations will take place every three years rather than every five years.

Tax-Free Personal Allowance

The personal allowance has increased from £11,500 to £11,850 per year. This will result in an overall tax reduction in 2018/2019 of £1,075.

Research & Development Tax Relief

Small businesses that conduct research and development and claim the RDEC standalone tax credit will benefit from further tax relief measures. The rate will increase from 11 per cent to 12 per cent of a firm’s qualifying research and development expenditure.

British Business Bank Boost

The British Business Bank (BBB) has been given a funding boost of £2.5 billion. This comes as part of a larger £20 billion Patient Capital investment designed to assist fast-growing businesses in scaling-up. The funding has the objective of encouraging more long term investment in scale-up businesses carrying a greater risk. It’s the biggest government commitment to date to the BBB.

National Living Wage

 The National Living Wage (NLW) paid to workers aged 25 plus will increase to £7.83 from £7.50 per hour, resulting in a £600 per year increase.

Partnership Tax

Legislation has been updated to fall in line with commercial arrangements for allocating profit shares with the objective of avoiding additional administrative burdens for taxpayers. The changes will come into effect as of the tax year 2018-2019.

Marriage Allowance

The Marriage Allowance – the amount of unused personal tax allowance that can be transferred between spouses or civil partners - will increase to £1,185 as of April 2018. Marriage allowance claims are now allowable on behalf of deceased spouses and civil partners as of 29 November 2017.

If you have any queries or concerns about the changes brought in by the latest Budget, why not discuss them with your local bookkeepers?

 

Key Ruling in the Long Running Self Employed or Employed Argument

Is your workforce employed or self-employed? The recent high profile case involving Uber drivers may well have connotations for other employers operating businesses on a similar basis.

The question as to whether your workforce or parts of it is classed as employed or self-employed has been a source of contention between businesses and HMRC for many years.

The issue of employment status is considered serious by HMRC, which is keen to get to the bottom of whether claims by business owners that its workforce is self-employed are genuine. If workers are deemed to be employed rather than employed, then the business owner is liable for making tax and National Insurance contributions. Obviously HMRC is eager to ensure it is receiving all the contributions it should.

Uber Judgement: Drivers ARE Workers

Just in the past few days and in one of the most high profile cases of its kind, the Employment Appeal Tribunal (EAT) has confirmed that drivers for the well-known taxi firm Uber should be classed as workers who are entitled to basic employment rights.

It was the Uber drivers who argued that they should be classed as workers. In Aslam and others v Uber BV and others, the Employment Tribunal held that the drivers are entitled to receive paid annual leave and to earn the National Minimum Wage, amongst other benefits.

Numerous factors played a part in the ruling. Whilst Uber drivers are able to make their own choice as to where and when they work, they are subject to an interview and induction process and can be dropped if they fail to perform or are found guilty of serious misconduct, following a set warning process.

The drivers however have to work exclusively for Uber, which is a key indicator in establishing whether a relationship is employment based.

There have been other high profile cases in the past, for example Addison Lee, which met with the same ruling as Uber. Deliveroo and CitySprint came under similar scrutiny.

What Now for the Gig Economy?

The gig economy – the blanket name for the type of working arrangement that these companies follow – has in the past involved numerous companies attempting to shroud their workforce arrangements undercover of a self-employment basis. However, courts and tribunals have recently uncovered the fact that they are in fact employment based agreements.

The recent Uber ruling will have far reaching connotations for its 40,000 or so strong workforce. It is thought that many of the drivers will seek to make back-dated claims for minimum earnings, holiday pay and other such benefits that they should have been entitled to since they were taken on.

TUC general secretary Frances O’Grady said: “This ruling should put gig economy employers on notice. Unions will expose nasty schemes that try and cheat workers out of the minimum wage and holiday pay. Sham self-employment exploits people and scams the taxman.” 

Be Sure to Check the Employment Status of Your Workforce

It is crucial for business owners to be clear on how their relationships with their workforces will be construed by HMRC.

If you are unsure as to whether your workforce should be classed as employed or self-employed, discuss it with your local bookkeepers. They’ll advise you as to the correct status so that you can take appropriate steps to ensure your business is risk free in this respect.

The Importance of Getting Your Buildings Reinstatement Value Right

The property from which you operate your business is obviously of vital importance. What would you do if it was completely wiped out? No doubt you’d rely on your buildings insurance to cover you for full reinstatement.

If this is the case, then you’ll need to check something vitally important: that your buildings reinstatement value has been quoted correctly on your insurance policy. If it hasn’t then you won’t be adequately covered, which means you won’t be paid the amount you need to get your premises back to where it was or to cover your incurred costs during its rebuild.

One of the most common mistakes made when insuring commercial premises is with the reinstatement value. A lot of people believe that the reinstatement value, also known as the ‘Declared Value’ or rebuild value, tallies with the current market value of the property. This is not the case however.

What is Reinstatement Value?

Reinstatement value refers to how much it would cost to completely rebuild a property from scratch. As well as the actual rebuild itself, the value will include other factors such as site clearance, debris removal and professional fees for surveyors and architects.

If you get the reinstatement value wrong then you could end up underinsured, which means your insurer will only pay out a proportion of the total rebuild cost, and that will be directly connected to the amount by which you are underinsured.

So for example, you have insured your commercial property at a Declared Value of £100,000. The actual rebuild cost runs to £300,000 however. The insurer will only pay out a third of any claim you make.

It is therefore a false economy to declare a lower rebuild cost, even if it appears tempting in order to keep the premium down.

How to Calculate the Correct Reinstatement Value

You can obtain a reasonably accurate reinstatement value from a recent mortgage offer. However, the most accurate figure and perhaps the only 100 per cent guaranteed one will come from a qualified buildings surveyor’s report. Their report will follow a detailed inspection and will therefore be completely accurate, as well as being something you can totally rely upon.

Bear in mind that reinstatement values should be regularly reviewed, as costs do rise.

The good thing about investing in a professionally calculated reinstatement value is that it could well uncover the fact that you are paying more than you should be for your buildings insurance.

GDPR Essentials for Businesses

Back in August we wrote about how a new Data Protection Bill was set to be published in September this year which would bring the EU’s General Data Protection Regulation (GDPR) into UK law.

GDPR is now officially due to come into force on 25^th May 2018 and will mark the most wide-ranging change to global privacy law in two decades.

GDPR will apply to any organisation that provides goods or services to or tracks or creates profiles of EU citizens. Brexit won’t stop its introduction, especially as until March 2019 we remain part of the EU, but in any case it is widely believed that the UK will adopt its own legislation that will incorporate the GDPR legislation.

GDPR should in theory make the business owner’s life easier because there will be clarity as to how they should be controlling data. There are all sorts of new rules that must be followed, with failure to do so resulting in substantial fines that could reach €20 million or four per cent of group global turnover.

How to be GDPR Compliant

As a business, there are three key areas in which you’re going to need to ensure you are compliant.

Consent

Anyone you wish to contact for marketing purposes must have opted in to receive communications from you via a ‘clear, affirmative action’. You are no longer permitted to use pre-ticked boxes hidden away at the end of a form or terms and conditions. Neither can any wording that relates to receiving marketing communications be ambiguous or unclear. Opt-outs are no longer allowed; GDPR heralds the age of the opt-in. It’s going to be necessary to cleanse existing mailing lists so that everyone opts in under the new rules, otherwise you will no longer be able to contact them after May 2018.

Right to be forgotten

You can no longer keep data for any longer than you need to, and for anything other than its intended purposes. Data must not be kept indefinitely and any EU citizen will retain the right to request that their data is removed where no legitimate reason exists to process it.

Personal data processing

Data can no longer be held just for the sake of it. A legitimate reason must exist for you to have brought data together. You must also have a clear reason concerning what you intend to do with the data and for how long you will need to use it. You’ll need to be upfront with consumers as to this information.

Time to get ready for GDPR

There is no time to waste in preparing for GDPR. Whilst it may seem a long way off, the fact is there is a lot to do, and if you haven’t ensured that everything is in place by the deadline of 25^th May 2018, then you could be at risk of non-compliance fines.

If you have mailing lists that need to be opted in, you should not leave this to the last minute as consumers could well end up fed up with the bombardment of email requests by this time, which could lead to wholesale deletion.

There is useful guidance on the Information Commissioner’s Office website as to how you’ll need to comply with GDPR. You could also talk to your local bookkeepers for tailored advice on the various aspects that apply to your particular business.