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 on0870 228 1999 or email us on info@stanleycarter.co.uk
If the Brexit negotiations last year seemed tense, they are likely to pale in comparison to the upcoming discussions regarding the terms of the new trading relationship between the UK and Europe.
UK politicians are not in agreement about what would replace the EU Single Market and Customs Union memberships.
The uncertainty surrounding London Stock market
Negotiations need to be completed within nine months to leave enough time for any new agreement to be ratified by parliaments before the UK leaves the EU on 29 March next year.
Given the stakes, there is a high probability of a breakdown in talks and of the economically damaging “hard Brexit” materialising.
In such a scenario, the UK would lose tariff-free access to its largest export market and have to fall back on World Trade Organisation rules. This would entail the imposition of mid-single digit tariffs on UK exports to the EU.
More importantly, exports would also have to abide by complex rules of origin regulation, a heavy burden that would be both time consuming and costly, particularly for SMEs. A hard Brexit would likely lead the pound to retest its post-referendum lows. Higher inflation would likely push gilt yields up.
Another risk, with arguably a wider range of consequences, is the spectre of early elections. With Brexit negotiations dividing the government, there is a material probability of a general election before the end of 2019, particularly as Theresa May has a razor-thin working majority of only 13.
A Labour Party win cannot be dismissed, given its surge in the polls since mid-2017.
A wide array of outcomes would then be possible for financial markets. On the one hand, should Labour win a sweeping majority and push for a hard Brexit, UK financial markets would almost certainly come under pressure due to nationalisation and £500bn fiscal spending programme.
In a more benign scenario, Labour would emerge victorious, but without a majority of seats, making it more difficult to pass extreme policy measures. Should it also shift its stance on Brexit and opt for a Norway style agreement where access to the Single Market is retained, it is conceivable the pound and economy could both strengthen.
In our view, UK equities present a less attractive proposition than those of other regions, despite having more appealing valuations.
UK equities lagged in 2017 and we think this is set to continue in 2018, given the unappetising stew of severe political risk and a comparatively weak economy. UK equities look especially cheap compared to other markets, particularly on a price-to-book value basis. This is partly due to the structural derating of banks and commodities.
On a forward price to earnings basis, excluding commodities, the UK trades at a 10 per cent discount to global markets; a level it hasn’t seen in nearly a decade. In our view, such cheapness is warranted, given the risks enumerated above. The earnings growth expectation of less than six per cent for 2018 is comparatively uncompelling. With the number of profit warnings at a six-year high in the third quarter of 2017, earnings expectations may well be reined in further.
As a high dividend paying market, yielding four per cent overall, the UK has tended to underperform when monetary policy is tightened. UK equities are also still largely exposed to commodities and emerging markets, which are both highly sensitive to the US dollar. Should the dollar rally, as we expect, it could also contribute to restraining UK equity performance.
Should the pound weaken due to a breakdown in negotiations, some argue that UK equities could rally, much like they did after the referendum results. But we think this could be interpreted as the worst scenario, in which case, equities may well dissipate. The outlook is finely balanced.
We remain selective, preferring high-quality businesses with sound balance sheets, robust cash flow generation, and a track record of compounding returns to shareholders. We maintain our bias towards international exposure, focusing on companies exposed to the robust European economy, or US tax reform.
We struggle to be enthusiastic about domestic stocks. Domestically focused FTSE 350 stocks have underperformed their peers with international exposure by more than 15 per cent over the past three years.
With the barrage of pressures unlikely to fade in the short term, we believe it is too early to step back into domestic stocks. The UK outlook is mired in uncertainty, and we expect volatility to increase. This could mean better entry points for equity, fixed income, and foreign exchange investors in the months ahead.
We can assist and advise on how to invest on London stock market. send us an email on info@stanleycarter.co.uk or contact us on 01612056655
Britain’s banks are booking future credit card income long before it materialises, prompting concerns about the accounting practice among regulators, investors and analysts.
Riskier products such as credit cards have become more popular among banks in search of higher returns in recent years. In the first nine months of 2017, cards brought in 1.5 billion pounds in income for Barclays alone.
But how banks account for interest earned on zero percent balance cards, which attract consumers with sometimes long initial interest-free periods, is worrying some. Britain’s Prudential Regulation Authority warned that if banks are wrong about how customers will behave it could hit their capital.
Banks start booking interest income immediately after issuing the card, even though some customers may not pay any for years and could switch banks at the end of the interest-free period, before rates which can be as high as 20 percent kick in.
Barclays, Lloyds Banking Group and Virgin Money have all offered such deals, while Royal Bank of Scotland, one of Britain’s major lenders, does not.
Under international accounting rules, banks predict how much income the card will earn in total, and then spread this out equally over the years they expect it to be active.
Forecasts are based on assumptions the banks set themselves, including how many customers they think will continue to use the cards after the interest-free period ends and for how long.
Interest income can also include upfront fees and interest charged on additional purchases.
Executive pay fell last year but top bosses will still have made more money in three days than the typical worker earns in a year, new figures reveal.
UK top executives pay gap
The mean pay of chief executives in FTSE 100 companies fell by a fifth from £5.4 million to £4.5 million – 120 times more than an average full-time worker, a slight drop on the ratio of 122-1 in the previous year.
The High Pay Centre think tank and the Chartered Institute of Personnel and Development (CIPD) said there had been “modest” restraint by company boards but the pay gap between the top and average workers remained wide.
All listed companies will have to publish the pay ratio between bosses and workers under new corporate governance reforms this year.
While it was encouraging to see a tiny amount of restraint on pay at the top of some FTSE 100 companies last year, there are still grossly excessive and unjustifiable gaps between the top and the rest of the workforce. Publishing pay ratios will force boards to acknowledge these gaps.
The drop in pay in the last year is welcomed but will have largely been driven by the Prime Minister’s proposed crackdown on boardroom excess.
It is crucial that the Government keeps high pay and corporate governance reform high on its agenda, but we also need business, shareholders and remuneration committees to do their part and challenge excessive pay. We need a radical rethink on how and why we reward chief executives, taking into account a much more balanced scorecard of success beyond financial outcomes and looking more broadly at areas like people management.
The current review of the UK Corporate Governance Code provides a great opportunity to broaden the remit of remuneration committees to ensure that there is much more focus on the wider workforce and employee voice when decisions on chief executive pay are being made, to improve fairness and transparency.
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.
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
