Tag Archive | "red tape"

Should online accountants encourage micro-firms to still file accounts?

There are growing concerns amongst finance professionals that the government’s plans to exempt small businesses from filing accounts with Companies House might backfire.

Under new proposals, firms with an annual turnover less than £88,000 will no longer need to file statutory accounts, but experts believe this could make it harder for them to get access to trade credit. The Institute of Credit Management’s chief executive, Philip King, said suppliers rely on financial information when deciding whether or not to extend credit terms. If micro-firms do not need to file accounts, suppliers are unlikely to give them credit.

He thinks that businesses should provide more information rather than less and that rather than encouraging growth, the government’s new proposals will restrict it.

Graydon, the credit reference agency, recently conducted research that found that only 8% of businesses would extend credit if they did not have access to a company’s financial information. Martin Williams from Graydon said that most suppliers admitted they would not grant credit or finance to a small business unless its financial information was available.

He went on to explain that this is not the solution to reducing the red tape problem and there is a danger that it will actually increase the administrative burden on SMEs if they have to answer financial questions directly from trade suppliers.

A lot of entrepreneurs were no doubt relieved when the EU agreed to exempt micro-businesses from filing some reports with Companies House. Ed Davey, the business minister, said this was a significant step forward in the battle to reduce red tape. However, businesses would still have to file simplified information at the government’s discretion.

It has not been decided whether the UK coalition will actually adopt the new rules and in the meantime, financial experts hope they can convince the government that they will do more harm than good.

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Red tape is still stopping businesses grow

Small enterprises, including accountants for contractors, in the UK say that one of the most onerous and complex issues they face is still excessive red tape.

According to a recent survey by the FSB, 27% of UK businesses think increased regulation makes it hard to expand and 33% believe regulation provides the biggest obstacle to growth.

The coalition has placed a three year moratorium on new domestic regulations for micro businesses. But the FSB has expressed disappointment that some large regulations are not covered by this moratorium. Of particular concern are regulations which increase the administrative and organisational burdens on small firms, such as extending paternity rights and removing the default retirement age.

The Home Office recently invited businesses to tell the coalition what it should do to reduce bureaucracy and boost business growth. The Red Tape Challenge website has been set up to give everybody the opportunity to contribute their opinions and suggestions on the subject of bureaucracy.

One problem that we face in the UK is that even if we scrap certain domestic regulations; we can do nothing about the legislation drawn up in Brussels. So even though micro firms are exempt from our government’s regulations during the moratorium, they still have to comply with edicts drawn up in the EU. However, the government does admit that it may have enforced some EU regulations beyond the minimum legal requirement.

Reducing bureaucracy is going to be a long process. The Red Tape Challenge is open until April 2013 and will look at more than 21,000 active rules and regulations.

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Flexible working and parental leave reforms could harm SMEs

The UK government has pledged to reduce red tape and yet its latest proposals to change parental leave and flexible working will increase bureaucracy, according to the FSB.

The Federation of Small Businesses has expressed its concern that the coalition’s plans to introduce changes to parental leave and extend flexible working will damage small businesses.

Although the FSB has been calling for reform of the parental leave regulations, the government’s proposed solution of allowing parents to take chunks of leave, instead of one block, would make it far more complicated to administer.

The government has launched a consultation on the proposals and the FSB will be contributing by expressing the opinion of small businesses.

The FSB’s national chairman, John Walker, said that despite promising to ease the burden of red tape, the government plans to introduce additional complexity which will make things even more time confusing and complicated for small businesses.

It will be extremely onerous for small firms and limited company contractors to organise workloads and cover for an employee who decides to take parental leave in chunks rather than a continuous block of time. The majority of small businesses already allow flexible working and the FSB urges the government not to make it mandatory for employers to consider requests for flexible working after a 26 week qualifying period as it would pile yet more red tape on them.

David Cameron wants the private sector to drive the economic recovery but changes to these regulations could further deter small businesses from hiring more staff, Walker concluded.

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Will accountants for contractors take on the Red Tape Challenge?

Since the coalition launched its Red Tape Challenge website, more than 6,000 responses have been received, according to government data.

Businesses and limited company contractors have been invited to submit their comments on current and forthcoming legislation to give the government an opportunity to adapt the regulations before they are implemented.

A lot of the published statements have called for changes in the retail environment and industry sector champion, Dr Kevin Hawkins, urges consumers, suppliers and trade associations to visit the site and express their concerns and solutions. He described the Red Tape Challenge website as a chance “too good to miss”.

He went on to say that this is the first time the government has given those at the sharp end of complex regulation the chance to be heard. This is a golden opportunity for business owners to tell politicians about the bureaucracy that wastes time and money and suggest ways to improve things for both themselves and their customers.

The business secretary, Vince Cable, says that unless ministers can come up with strong reasons why an item of unpopular regulation should remain, government departments will scrap it.

Amongst other legislation up for debate, the website contains 278 environment regulations, 264 concerning pensions and 151 that cover employment law.

The portal has already received concerns over the Care Quality Commission agency and health and safety guidance.

One man wrote that the CQC does not understand that dentists operate small businesses and do not have the staff to spend hours filling in forms and undertaking compliance audits. He went on to point out that too much reliance is put on box ticking exercises and the government doesn’t seem to appreciate that professional staff are regulated and are committed to providing the highest possible standards.

The owner of a small construction company recommended a rethink over the work time allowable for the use of steps and ladders.

However, not everybody is happy about this new government initiative. One lady asked why the public was being asked to contribute their views when MPs are paid to sort out these problems.

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Are contractor accountants held back by employment legislation?

Contractor accountants should be aware that the government is planning to overhaul the UK’s employment laws in order to help the economic recovery.

One of the proposals, which has already provoked fury, is to allow firms to fire employees who are underperforming during their first two years of employment, without the threat of facing an unfair dismissal tribunal. Under the current regulations, an employee can seek redress from an employment tribunal if they are sacked after 12 months.

The coalition is also looking into the system of tribunals at present. Business groups, such as the BCC are urging for immediate reform but the TUC suggested that workers could be discouraged from seeking justice if major changes are implemented.

Union leaders are also concerned that increasing the qualifying period to two years could give a green light to unscrupulous employers to break the law.

The coalition is likely to launch a consultation into the future of tribunals after business groups complained that there was a 56% increase in the number of cases in 2010.

One possible solution would be to charge claimants a deposit of up to £500 which would be refunded if the case was successful. But the TUC argues that this will deter low-paid workers from seeking justice.

Meanwhile, Vince Cable, the business secretary, has been asked to look into whether small businesses could be exempted from some employment regulations but any such changes could see the government in hot water from the EU.

David Cameron wants to see new jobs created this year in order to boost the economic recovery and whilst large companies have promised to do exactly that, smaller firms need more encouragement. Reforming the employment tribunal system and reducing the red tape for small businesses could go a long way towards providing it said David Frost from the BCC.

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Gold-plating of EU directives is to stop immediately

Shortly before Christmas, the Business Secretary Vince Cable, promised to help British firms compete better against their continental rivals, by cutting European red tape.

The Government plans to stop the “gold-plating” of EU directives in cases where implementation goes beyond the minimum standard decreed. This new policy will take immediate effect.

In future, the text of European directives will be written directly into British law and will mean that the UK’s interpretation of the law is not unfairly restricting British businesses and limited company contractors. Additionally, every five years ministers will review the European directive legislation and will consult with businesses on the application of the rules.

The ARC has welcomed the coalition’s move, saying it will help businesses in the UK compete fairly. Chairman Adrian Marlowe said that nobody has asked for favours, but by helping Britain compete, the way is set for greater employment and prosperity.

Copying EU directives directly into law without adding interpretations makes sense and this should ease the problems of actually implementing the regulations. EU legislation is not subject to open debates unlike UK led regulations. Legislation, such as the AWR, will be able to pass straight into law without parliament voting on it.

Marlowe explained that the Agency Workers Directive contains “gold-plating” that is not essential under the EU directive and this has put both recruiters and employers at a disadvantage.

Marlowe also pointed out that the use of agreements between social partners causes concern. A few organisations get disproportionate authority and if this device continues to be used he urges Mr. Cable to make sure the entire process is open and transparent.

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£100 billion is washed down the drain each year in red tape

Basic administrative tasks relating to bookkeeping, invoicing and billing and filling out timesheets take the average worker in the UK 37 days every year, according to Keboko, the cloud service provider.

The cost of all this red tape amounts to more than £100 billion and could encourage freelancers to get help from a contractor accountant in a bid to reduce the amount of time they spend carrying out administrative duties.

Charlie Cowan, the CEO of Keboko, commented that companies should be trying to rebuild after the recession but instead many workers are finding it hard to do this as they are bogged down with tasks such as data input and updating reports. UK businesses are basically throwing the money spent on these tasks down the drain.

The burden of dealing with the taxman is also costing businesses dear, the IoD reported earlier this week. The Institute surveyed its members and discovered that there is still considerable room for reform to reduce the administrative burden surrounding taxes. The survey also discovered that 30% of businessmen would actually advise someone not to start up their own business because of the weight of the tax burden.

An overwhelming number of directors want to see the regulations concerning PAYE and National Insurance simplified. Business people sometimes struggle to understand the tax rules and have difficulty finding out the correct information when they contact HMRC. Only 15% of respondents said it was easy to get the right information when they called the HMRC helpline while a third said it was very or fairly difficult.

HMRC’s website does not fair any better either. 16% said they could find the information they needed easily but again 33% struggled to find what they needed to know.

Since the PAYE coding errors earlier this year, businesses have found it increasingly difficult to get through to the Revenue’s helpline. 37% of the directors who did manage it feel that the majority of HMRC officials have a poor understanding of the nature of their business.

Half of the directors surveyed said they want the OTS to simplify the PAYE and NI system and 28% said the taxation of employee benefits was the area most in need of simplification.

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Don’t forget small businesses, the FSB urges Milliband

The waiting is over and Ed Milliband just managed to win the Labour leadership battle against his brother David.

The FSB is urging Milliband not to forget that small businesses and freelancers are essential to the UK’s continued economic recovery. A survey of 4,000 of the Federation’s members found that 75% of them want to see a simplified tax system in the UK whilst 33% are concerned that the growth of their business is hindered by too much red tape.

The National Chairman of the FSB, John Walker, wants to remind Mr Milliband that SMEs are the largest employer in the UK and as such are vital if the UK is going to continue along the road to economic recovery.

One of the problems that all the party leaders have to tackle is the current crisis within our banking system. There is a lack of competition amongst the high street banks and this has led to the banks lending less. Figures from the Bank of England showed that the crisis surrounding small business lending still exists and companies that have received funding are paying high interest rates on their loans.

Last Monday, Vince Cable stressed that the banks must do more but will they listen? At the moment nearly 500 SMEs collapse every week and yet the banks do have the money to lend.

In the 12 months from July 2009, the banks received £47 billion more in loan repayments than they advanced in new loans. This shows that the larger organisations are repaying their loans but the banks are reluctant to hand out new loans. If we are to avoid a double dip recession, this trend has to change, and quickly. But is the current government strong enough to force the banks into submission?

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Online accountants should prove their qualifications

UK200 wants the government and accountancy industry bodies to do more to highlight the differences between qualified and unqualified accountants.

Anybody can set themselves up as an accountant and a lot of clients don’t appreciate that firms who are not regulated are offering substandard advice, albeit at a cheaper price than a regulated practice.

The MD of a firm of accountants in Chesterfield pointed out that at first glance there seems to be very little difference between a qualified or unqualified accountant. However, there are some things that an unqualified accountant cannot do.

Software packages now make it easier for limited company contractors to do their own accounts and coupled with the coalition’s proposals to reduce red tape, unqualified accountants could start to find life even easier.

The UK200 Group wants the ICAEW and the ACCA to promote the brand so that people won’t use an unregulated accountant. They would also like to see the government take action to regulate or close down operators who are unqualified.

The vice-president of UK200, Jonathan Russell said that some small accountancy firms are seriously thinking about whether the burden of regulation is now too onerous to bother with. Russell thinks that there are three possible options going forward. Either regulation has to be compulsory for all accountants, or accountants who are not qualified are barred from practising, or the regulation on those who are qualified is reduced so that they can compete on a level playing field.

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Excessive bureaucracy may start to disappear

The Reducing Regulation Committee had its first meeting last week and contractor accountants are relieved that something is eventually being done to cut the red tape that has strangled enterprise over recent years.

Vince Cable, the business secretary, is heading the Committee which met for the first time on July 1st. Mark Prisk, the Small Business Minister, Francis Maude, the Cabinet Office Minister and Danny Alexander, the Chief Secretary to the Treasury, are also members of the Committee.

Mr Cable said that the government must give the balance of power back to individuals. Businesses such as online accountants are required to drive economic growth, not spend all their time filling in forms. The Committee wants to change Government culture away from regulation and find alternative ways of solving problems.

In future, all proposed regulations will have to be stress tested by the Committee and only those which are deemed high quality and priority will be allowed to proceed. There will also be a one-in, one-out system so that businesses will not be burdened by excessive regulations.

The first meeting coincided with the launch of a new government campaign called Your Freedom. Limited company contractors and individuals are invited to tell the government which of our current laws and regulations they would like to see abolished.

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Businesses are drowning in paperwork and red tape

According to the latest figures from Institute of Directors (IoD), SMEs in the UK are collectively spending as much as £80 billion on red tape and compliance.

The staggering statistics were revealed just as the IoD called on the government to formulate a new approach to measure exactly how much small businesses are spending on paperwork, forms, and limited company compliance.

With the general election only months away, many SMEs are now hoping for a culture change in the civil service. The department has historically been rewarded for introducing regulation on a volume basis rather than focusing on whether or not it truly adds value to the UK economy.

A spokesperson from the IoD described the amount of regulatory paperwork as “excessive” even for professional services such as solicitors, doctors and contractor accountants. According to the IoD, unless there is a fundamental change in the way civil servants are incentivised, UK SMEs will continue to struggle with excessive and often unnecessary paperwork than prevents them from growing their businesses and ultimately creating employment.

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