Starting a business can be a risk

There are so many things that could go wrong and what business owners need to know is that compliance is one of the best ways to manage most risks that are inherent to Startups. Non-compliance to regulatory requirements results in fines, restrictions on operations, and license revocations. Therefore, Startups must observe compliance guidelines to ensure smooth operations. Compliance can be a complicated affair, especially when you realize just how much needs to be done.

Here are some aspects of compliance that are relevant to every Startup.

Choosing the Right Business Structure

Deciding whether your business will be a sole trader, partnership, limited company, or any other type is extremely important. There are regulations and tax requirements that are unique to each business structure. Understanding how your business structure relates to compliance is the first step for every entrepreneur.

You might have enough capital to register as a sole trader or require funding hence opt for a limited liability company.  Business capital is governed by a unique set of laws that you have to consider. Whichever the case, keep tax and other regulatory obligations in mind as you make this choice.

Most SMEs either comply with basic registration or overlook it completely. This is a grave mistake that could have serious legal implications. Take the time to understand the categories your business falls under and what is expected from you as far as registration goes.

Adhering To Audit and Tax Regulations

All businesses are required to carry out yearly audits and prepare annual audit reports. These reports must contain all financial transactions of the year. Startups and SMEs are not exempted from this regulatory requirement.

Auditing may not be a familiar concept for most people running startups simply because not everyone knows the ins and outs of recording transactions. To simplify auditing and ensure you comply with regulatory requirements, maintain a book of accounts. Hire an auditor to crunch the numbers and prepare a report.

Startups are required to declare their tax liabilities at the time of incorporation. Failure to do so creates inconveniences down the road.

If you need any assistance or require further information please contact us on 0870 228 1999 or email us on info@stanleycarter.co.uk

What to consider if you are expanding overseas

Since the UK voted to leave the European Union (EU) in 2016, there has been one thing on the minds of HR professionals and business leaders alike the issue of hiring and maintaining overseas staff.

Business, HR, EU, Around the world
Planning to move or expand your business overseas?

Brexit has cast a question mark over the future of the global workforce and with VISA issues for existing staff looking to be problematic and hiring overseas talent going to become more difficult, businesses need help.

To achieve this, Human Resource (HR) departments and those responsible for recruitment must be aware of the options available to them to enable the business to easily expand and hire the people they want, where they want. This is where organisations should look towards partnering with a direct Employer of Records (EOR) service provider.

With a potential economic slump on the cards, preparation is key. A third party service used by businesses looking to expand and create entities overseas, an EOR takes care of all of the issues traditionally associated with the minefield that is global recruitment. Helping make the transition into new territories more simple, these service providers speed up the process of setting up shop abroad in a cost effective way. So how does it work and how can it really help in a post-Brexit world?

Time saving

Carrying out HR tasks is time intensive and it’s no wonder that companies often wildly misjudge the time it takes to carry out processes which are traditionally the expertise of HR professionals during periods of global expansion.

Sorting out documentation and translations, hiring new staff, and getting to grips with local payroll and tax regulations are all obstacles that can take a relatively long time to work through when setting up a new office abroad. Underestimating the time it takes to establish a business overseas is a key pitfall faced by organisations expanding globally.

But this is where an EOR service provider can help. Taking responsibility for all processes relating to employment contracts, payroll and tax compliance away from HR departments, EORs can save them time and prevent unnecessary stress when it comes to dealing with the nuances in specific regions.

Outgoings

The costs associated with expanding overseas can be crippling, especially for small business wanting to ride the wave of success onto pastures new.

Unforeseen costs can come from multiple sources, depending on the country you are looking to expand into. These include, but are not limited to, recruiting staff, funding health or housing benefits and complying with the legal requirements for annual leave outlined by the host country.

For instance, in China, an employer is required by law to foot the bill for an employee’s housing fund and social healthcare programmes and in Switzerland, those under the age of twenty are entitled to one week more annual leave than the rest of the population. And those are countries that aren’t even in the EU, so add the other twenty seven member states and the nuanced ways they do business into the mix and you can see how complex things get. Especially as the UK does much of its business with EU countries.

It’s factors like these that not only mean business owners are confronted with costs they were not expecting, but also are at risk of legal repercussions should they not comply with these country specific regulations.

EOR service providers can help here too. Setting up an entity abroad no longer needs to be decided on the basis of the financial reserves; time or legal expertise a business has available to it. Instead, this will be the only time that hiring another entity won’t actually cost the company money, but help it make savings.

Legal compliancy

Ensuring the decisions a company makes are above board is paramount to both its financial success and the longevity of its trading. The process of ensuring legal compliancy can be a daunting one and can put companies off recruiting staff and setting up shop in overseas territories altogether, or lead them to cut corners. The principal issue with this is that by bypassing the aforementioned formalities, businesses then run the risk of breaching both employment and tax laws.

EOR service providers can not only save businesses time, money and prevent them from breaching these local laws, but now the once-daunting process of setting up an entity abroad has never been easier. With EOR, companies can embrace the opportunities that lay ahead of them overseas with open arms, rather than confining them to function on a national basis only and HR departments and recruiters can rest assured things will be done correctly without affecting the talent pool.

If you expanding overseas and require help and assistance registering your company and/or employment contracts give us a call on 01612056655 or send us an email info@stanleycarter.co.uk or check our website for further details www.stanleycarter.co.uk

 

Skills you need to develop as an accountant

We take a look at the key skills accountants need to develop to pursue a successful career.

Accountants, skills, accounts
Skills required for accountants

If you are striving for a successful career in accountancy, there are a number of key skills which you should look to develop and build upon throughout your career.

A combination of accredited qualifications and excellent interpersonal and professional skills will enable you to pursue the successful career you are aiming for.

Adaptability

The accounting industry is changing rapidly. The role of the accountant is becoming more of an advisory one as technology automates processes and removes the need for paper. Clients have new expectations, and accountants can now collaborate and work with their customers in real time.

With technology bringing constant change, accountants need to be able to adapt quickly and react to whatever curve ball is thrown at them.

Openness           

Honesty is highly valued in the accounting world. Accountants and the firms they work for pride themselves on adhering to the highest ethical standards and always treating their clients with honesty and integrity.

It is important to be transparent when making decisions, providing advice, and completing tasks. This is true of every workplace relationship, whether with clients, your manager, or when working in a team of colleagues.

Strategic decision-making

Automation of many administrative tasks means accountants have more time to focus on the strategic decision-making side of their role; and clients know this.

Individuals who have strong commercial skills and have invested in their accounting training will be considered highly valuable by clients and firms alike.

Information technology expertise

Accountants should look to be knowledgeable in general IT and accounting software, especially when it is likely your client will know how to use it too.

Cloud accounting is the latest technology break-through in the accounting industry. Working in the cloud means data and software are available anytime and anywhere, so clients can keep their finances up to date across different platforms. Many clients will also be technically savvy about the cloud, but for those who aren’t, the accountant needs to step in and explain it clearly.

Communication

Clients and colleagues can communicate with you at any time they want to from anywhere in the world. Accountants need to be willing to interact with people across all mediums, from phone to video conferencing. It is a good idea to master social media as well as the more traditional email.

While clients may contact you regularly via the phone, most will also value face-to-face meetings. This is also the best way to build a trusting relationship. When it comes to complex financial or technical discussions, accountants must be able to relay information clearly and concisely.

Creative problem-solving

Change is likely to bring about challenges as well as positives. Therefore, firms need accountants who can think outside the box and come up with effective ways to solve new problems.

Initiative, a skill which can be developed in professional, educational, and personal situations, is highly valued by employers. Firms are keen to recruit staff who want to share ideas to continually improve business performance.

Customer service skills

For accountants working in public practice, it is essential to be able to build a strong relationship with current customers, in order to retain them, as well as being able to attract new customers.

In corporate accounting, individuals must meet the needs of the organisation’s other departments and their managers. In both instances, strong customer services skills are invaluable.

Here at Stanley Carter we are a highly skilled and experienced accountancy firm. If you require any help or information please contact us on 0161 2056655 or send us an email info@stanleycarter.co.uk or check our website for further details www.stanleycarter.co.uk

Would the new corporate governance code have saved Carillion?

Carillion, the second largest building contractor in the UK and the lead on a number of key public service contracts, entered into liquidation last week. Various commentators have highlighted poor governance at the company but would the revised UK Corporate Governance Code recently announced by the Financial Reporting Council (FRC) have prevented its collapse?

What caused the collapse?

There are differing views as to what caused Carillion’s problems but many have pointed at internal failings and a poor governance culture. Roger Barker, Head of Corporate Governance at the Institute of Directors said “it is clear that major providers of public services must be governed in a prudent manner”. He suggested that the collapse highlights a lack of effective governance at Carillion and questioned whether the board and shareholders acted appropriately before the collapse.

The Government has acknowledged these worrying signs and has ordered an investigation into the conduct of Carillion’s directors. Executives at the company are said to have tweaked rules in the firm’s bonus scheme to make it harder for those bonuses to be clawed back if the company failed. This sounds like the executives were trying to preserve their own position at the expense of shareholders’ interests. The bonuses have been branded ‘exorbitant’ in the House of Commons.

Further concerns related to the excessive pay of former chief executive Richard Howson who received £1.5 million in 2016. Carillion also agreed to continue paying his remuneration until October this year, handing him a £600,000 salary.

Many believe that the directors of Carillion did not follow responsible internal processes. Recognising the crippling debt, and other significant problems the company was facing, they should have acted in the best interests of the company and looked to minimise the risk of collapse, which eventually became unavoidable.

The revised corporate governance code

Poor corporate governance, particularly excessive executive pay, has been a hot topic for reform in the last 12 months. The FRC has opened a consultation on those proposed revisions after undertaking a ‘comprehensive review’ of the code.

In the consultation document, the FRC highlights the heightened public scrutiny faced by the country’s largest companies and the impact poor internal governance can have on a wide range of stakeholders. So could the proposed changes help to prevent another Carillion failure?

The revised, ‘shorter and sharper’ code aims to encourage high standards by being clearer and more concise. It focuses on the application of principles relating to stakeholders, integrity, corporate culture and diversity.

Excessive pay

A significant change, introduced in an attempt to tackle excessive levels of executive pay, relates to shareholder dissent and the percentage of votes against a resolution. So when more than 20% of shareholders vote against a resolution, the company should: explain the actions it intends to take following the vote; publish an update on the position within six months of the vote; and provide a final summary in the company’s annual report setting out the steps taken as a result of the vote.

To increase transparency, the Investment Association has introduced a public register that lists companies which have experienced high levels of shareholder dissent. The first published list shows that, at their last AGMs, 24 FTSE All-Share companies received significant shareholder votes against their remuneration policies and 43 had 20% or more votes against their remuneration report.

The new code should give shareholders more say in how company executives are remunerated. The excessive pay levels at Carillion may have been tackled earlier had the directors had a greater responsibility to address shareholder concerns.

Employee engagement

The new code will require boards to establish a mechanism by which they can engage with the company’s workforce and gather its views. The collapse of Carillion will have serious repercussions for its 20,000 employees whose jobs are now in limbo. Perhaps if the board had engaged more directly with those employees and been required to listen to their concerns, steps could have been taken to safeguard their position.

Section 172 duty and stakeholder engagement

The Government intends to introduce legislation which would oblige companies to explain how they have complied with the requirements under section 172 Companies Act 2006 to take account of stakeholder interests when making decisions. This is needed to increase transparency and ensure the internal processes adopted by a company promote its success and are for the benefit of its members as a whole, whilst also taking account of wider stakeholder interests.

Carillion’s supply chain is thought to include up to 30,000 small businesses who had already suffered persistent late payments before the firm’s final collapse. The changes to the section 172 duty are intended to highlight that it’s not just the shareholders who are affected by the decisions of a company’s board of directors.

The future of governance

Whilst a range of factors contributed to Carillion’s collapse it is right that poor governance practices are being highlighted as a key contributor. But whether the new corporate governance code would have prevented the collapse is unclear. Ultimately, the new requirements will only bite if shareholders and investors are prepared to step in and hold boards to account.

The new code should help to increase transparency in a number of key areas, helping stakeholders to understand what is going on behind closed doors. Preventative action could then be taken to stabilise any struggling company before it reaches the point of no return as Carillion did earlier this month.

Give us a call on 01612056655 or email us on info@stanleycarter.co.uk or check our website for further details www.stanleycarter.co.uk

Changes to corporation tax loss relief

Corporation Tax
Corporation Tax is changing… and you need to know about it.

The Finance (No. 2) Act 2017 has introduced changes to the corporation tax loss regime. The rules are now more flexible for carried forward losses but restrictions to the amount of losses that can be carried forward have also been introduced. The changes apply to accounting periods beginning on or after 1 April 2017. If an accounting period sits on that date, the periods before and after are treated as separate accounting periods and its profits and losses for that period are time apportioned.

What was the position before the changes?

For periods before 1 April 2017, a company could set losses against profits of any description in the same accounting period and against profits of any description of an accounting period in the 12 months immediately preceding the period of the loss. If a trading loss had not been used in this way then the loss would be automatically carried forward and set against profits of the same trade in future periods.

What has changed?

Now, for trade losses arising in accounting periods beginning on or after 1 April 2017, they can be carried forward and set against a company’s total profits (including capital gains) in the next accounting period, subject to certain conditions being met (for example, that the trade did not become small or negligible in the accounting period in which the loss arose). The claim to set the loss against the total profits needs to be made within two years from the end of the later period. There are also similar changes to the loan relationships non-trading debit rules and the losses on intangible fixed assets rules, where the losses can now be set against total profits where they could not previously. All carried forward losses will also be available for surrender by way of group relief.

The new regime also introduces a restriction so that, from 1 April 2017, companies are only able to set losses against 50% of total profits exceeding an annual deductions allowance of £5 million. There is no restriction if profits are below the deductions allowance, so HMRC expect most small companies or groups to be unaffected. There are specific rules for single companies and groups of companies in relation to how the restriction and deduction are applied.

A targeted anti-avoidance rule (“TAAR”) has also been introduced to prevent abuse of the corporation tax loss rules. The TAAR enables HMRC to make such adjustments as are just and reasonable to prevent a loss related tax advantage arising from relevant tax arrangements.

Furthermore, the various relaxations described above (and indeed, a company’s ability to carry forward losses at all) are subject to particular limitations following a change in ownership of that company. Specialist advice should always be sought in these circumstances.

If you would like more information on how any of the changes or proposals affects you or your business or how they may apply in specific circumstances, please contact a member of our team on info@stanleycarter.co.uk or phone us 0161 205 6655 www.stanleycarter.co.uk

Ways to improve year end processes

 

Business and accounting paperwork
Continuous improvement is the key to success.

As with every New Year, January marks a particularly busy month for two sets of professionals; personal trainers and accountants. Gyms are at their busiest at the beginning of each year, packed with people wishing to stick to their New Year’s resolution to lose weight. Accountants, on the other hand, are spending many hours in the office trying to tie up year end.  As much as any financial controller tries to prepare, year end always ends up being a battle of time versus a multitude of tasks.

We live in the digital age where the importance of big data has become more noticeable than ever. Companies have come to rely on business intelligence to clean through vast data lakes in order to drive business strategy and increase profits. However, this increase in data volume impacts all departments, many of which still rely largely on manual processes. None of these are as critical to success as the financial control function. Heads of Finance will no doubt appreciate that their teams are recipients of data outputs from a variety of sources, which are then consolidated for financial and management reporting purposes; often relying on hours of dedicated data mining and formatting by overqualified accountants.

This juxtaposition between the use of highly automated business intelligence to create strategy and revenue versus the manual, laborious approach taken by the back office could not be more striking in 2018. Often, the real casualties in this scenario are data integrity and financial intelligence. For most companies, the effort required to complete key accounting and finance tasks takes away time that could be used to ensure the integrity of the data and deliver continuous management information that adds value, such as liquidity and budget forecasting.

Gaining financial control means getting ahead of the many period end processes and gaining efficiencies in the routine tasks, such as intercompany or expense management, in order to produce reports that add value to your business.

Without a doubt, gaining control requires automation. It would be easy to suggest that this could mean the end of the trusty old spreadsheet. For many this is not true, and a frightening thought.  But consider this; as data volumes grow, the limitations of spreadsheets becomes all too apparent. For many finance professionals, spreadsheets are the primary tool of choice for ad-hoc scenarios. It goes without saying that most financial controllers are highly adept at using systems such as Excel, Numbers or Lotus 123. But all too often manual processes are initially used as stop gaps which, in time, become strategic and part of the problem. This is particularly true when it comes to reporting. Unfortunately, the reliance on manual processes can, and does, lead to error.

It would be easy to dismiss the importance of spreadsheets. The simple fact is that spreadsheets are irreplaceable and will continue to be a part of every day life in finance. The trick is to limit their importance in any process and seek automation wherever possible.

Financial Control is at its busiest at the beginning of each month. The number of tasks performed during the first 3-10 days (depending on the firm’s policies) of the month to close off the previous month’s books is typically a challenge leading to countless late nights. Adopting a more streamlined, automated approach as outlined above significantly reduces time pressures and leads to a cleaner, more efficient month end close.

If you need any help with your month end accounts send us an email info@stanleycarter.co.uk or check our www.stanleycarter.co.uk

The new Accounting rules and the Banks

When launching or running a business, one of the most important responsibilities is to keep your finances in order.

Whether it’s hiring an accountant, opening a business account or registering with HMRC for corporation tax or VAT, there are a number of tasks to be done when you set up, and a bewildering array of banks, software companies and accountancy firms on hand to help.

UK Bank, UK economy
Bank in the UK economy

On 1 January 2018, a new accounting standard for how banks report on financial instruments, IFRS9, comes into force.

Financial reporting standards rarely sound exciting to non-accountants, but this one will have a real effect on banks and the economy. Impairment losses are the largest factor affecting bank profits, so changing how they are calculated will have a real effect.

Financial policy is currently going through a period of change, since fixing one problem can often prompt another. In this case, changes to a little-known accounting rule could well make lending to the real economy look very different.

Banks will now be required to estimate future losses on their lending. Come the New Year, they will be looking with great interest in ways to introducing new models to calculate “expected loss”. They will then have to hold larger credit provisions against this – in other words, even more rainy day money.

However, IFRS9 is no solution for all problems. In fact it may lead to volatility, inconsistency, lack of comparability, and the exacerbation of financial instability.

An estimate of future losses is just that; an estimate, and a highly subjective one at that. If a recession is predicted, these expected losses will accelerate, even if the current economic situation is gracious.

The requirement to hold more capital amplifies this, hence the increase in volatility.

But banks don’t like volatility, and their shareholders like it even less. This is therefore likely to mean banks change who they lend to and how they treat the customers they do lend to.

Any unsecured lending, for example, is likely to come under intense scrutiny. Banks won’t want to show erratic performance, so may reduce this type of business. There may also be particular sectors that show wide variations in loan losses. Banks will treat these industries less favourably too.

Comparisons between banks will be difficult, since their views of the future could be radically different.

The practicalities of considering several possible scenarios, calculating the probability of each occurring, and modelling the impact will be extremely challenging.

This may mean that banks intervene a lot sooner than businesses have been used to in the past. Businesses with some performance issues may find the bank manager knocking on the door sooner rather than later, perhaps to look at the prices of the loans.

In this way the standard could exacerbate financial instability, rather than countering it.

No accounting rule is perfect. But there is a misconception that IFRS9 will fix more than it can, and its shortcomings may become evident very soon.

Rather than creating technical issues over which accountants and analysts scratch their heads, this has the potential to influence how banks are perceived, with real knock-on effects to the economy and access to finance.

The more people understand some of the challenges in the new rules, the less likely we are to see businesses affected. This is why it is so important to increase understanding of what this change to the rules will mean.

If you think this will affect your business and require further information or help please send us an email info@stanleycarter.co.uk or check our website for further information www.stanleycarter.co.uk 

 

HMRC penalties to corporate Directors

The number of personal penalties levied by HM Revenue and Customs (HMRC) against corporate senior accounting officers (SAOs) remained high last year.  The figures showed that HMRC was taking an aggressive approach to enforcement. HMRC office

Given the scale and complexity of the money flows in large businesses, simple errors in the finance department can result in mis-reporting and subsequent fines. Finance directors need to understand all the requirements set out by HMRC. The policies, procedures and systems in place to ensure tax compliance need to be carefully monitored to avoid the potential for mistakes,”

There are two types of personal penalty that can be issued under the regime: firstly, for failing to take steps to ensure the accounting arrangements are adequate; and secondly, for failing to provide an annual certificate either confirming the arrangement are adequate or disclosing details of the deficiencies. Accounting arrangements are considered ‘adequate’ if they enable all relevant tax liabilities to be calculated accurately in all material respects.  Businesses can also be fined under the regime for failing to provide the name of their SAO to HMRC.

The total number of penalties issued under the SAO regime last year was actually lower than the number issued in each of the previous years.

If you have any queries about your tax or HMRC penalties send us an email on info@stanleycarter.co.uk or check our website for further information www.stanleycarter.co.uk

The risks of fraud in your business

Fraud is a real and growing problem for organisations and companies of all sizes. For SMEs, it can be catastrophic. According to the Annual Fraud Indicator 2016, the cost of fraud to the UK economy is £193bn a year and of course that is just the fraud we know about.

The danger of fraud if left undiscovered is that the perpetrator becomes emboldened in your company and it can repeat the behaviour. We have known situations where detection has taken five years or more by which time small amounts of expense fiddling have increased to large thefts with a real impact on the bottom line. Often it is a company’s auditor who spots irregularities but sometimes it can be an employee whistleblower or a change of manager who highlights a reason for suspicion. The only lesson for business managers is to be ever vigilant.

If you suspect fraud is taking place in your organisation and require expert advice please email us on info@stanleycarter.co.uk or check our website for further details www.stanleycarter.co.uk

 

Stock Exchanges – An engine for development

Stock exchanges already exert a certain amount of regulatory authority over listed companies. Whether this authority is granted explicitly by the government or established by industry guidelines and operational codes, exchanges routinely require companies to report on certain aspects of their operation in order to qualify for the capital-raising opportunities afforded by the market. These reports are mostly focused on good governance, but trends lately have tended towards other indicators, such as climate risk and gender parity. Some exchanges (in Brazil, India, and Hong Kong, for example) have built these ESG disclosures into their listing rules; others have issued non-binding ESG reporting guidance to their listed companies.

The world’s stock exchanges are also useful and scalable engagement platforms. Their position at the nexus of so many key players allows for enhanced and accelerated debate across the entire investment ecosystem.

The United Nations Conference on Trade and Development (UNCTAD) has collaborated with the World Federation of Exchanges (WFE) on a new report, titled The Role of Stock Exchanges in Fostering Economic Growth and Sustainable Development. The paper does exactly what its title implies, examining how stock exchanges can promote economic growth and sustainable development.

Their joint report was launched at the recent WFE Annual Meeting in Bangkok, Thailand. Introductory matter covers how modern stock exchanges really operate, and why they offer essential solutions to long-term economic problems. A fair amount of space is devoted to a key concept: exploring the symbiotic relationship between financial development and economic development. In other words, does the development of financial systems and tools simply follow economic signals, or does it actually drive economic development on a grand scale?

Some argue that the markets may not always serve as organic drivers of long-term economic development. A fair amount of blame for excessive short-termism and other potentially corrosive market impacts is laid at the feet of exchanges, where extra volume can mean extra revenues. Day trading, excessive speculation, and technology-assisted boom and bust trends may create a disconnect between the real and the financial economies, according to the report, resulting in a misallocation of capital and potentially destabilising economic consequences. But exchanges more than counterbalance this by increasing the ability of entrepreneurs, as well as more established corporations with expansion plans, to access the capital they need to grow their businesses.