With the Christmas holidays approaching, for those who have the opportunity, it is a good time during the holiday season to step out of business and have look at your business. Take a step back, review how the business is working (review how you work in the business!), what are your goals/ambitions for 2016 and take a look at some common problems/issues we flag to our business clients on a regular basis which all too often are put on the backburner using the excuse that “ I am too busy!”
Using self-employed contractors (including non-executive directors) to avoid the legal burdens of taking on employees can leave you open to theft of your intellectual property, data and customers if the correct contractual terms are not in place. If the contractor is not operating through their own personal service company, it could also result in HMRC charging you PAYE and employer’s NIC. Incorrect classification of an employee can result in the employer being held accountable for tax not accounted for through the PAYE system. This could include interest and penalties of up to 100% of the outstanding liabilities.
A Harbour Key client recently had a HMRC employment status enquiry which, although the tax liability was small, involved significant time and effort in dealing with the enquiry.
Action – Review your contractors regarding how they trade and the terms of engagement.
Business Names Act
If you are like us at Harbour Key, you will conduct the majority of your correspondence by email. However, we pick up a number of clients who don’t have a proper email “signature” that replicates the legal requirements shown on their business letterhead, (the company’s name, company number and registered office). As it is common to remotely reach agreements with customers and suppliers without them ever seeing a letterhead, i.e. knowing that you are limited company, should the contract go “sour” you could as the director agreeing the contract find yourself personally liable. This is regardless of the fact that you are a shareholder and director with limited liability because the customer may successful argue that they believed they were contracting with a sole trader.
Action – Tidy up your email signature, website etc. to display the legally required information.
Shareholders’ Agreement/Partnership Agreement
Forming a limited company with other shareholders (and in particular where the individuals are all equal shareholders) is often effected without thought as to the merits of having a shareholders’ agreement in place, mainly due to cost. Thereafter, as everyone is busy it continues to be forgotten. But what would happen if you can’t agree how to run the business or there is a dispute or a director/shareholder walks out? Without a properly constructed shareholders’ agreement (and particularly if in deadlock), this can easily lead to the company failing or you being caught in a situation that you can’t get out of – a situation that is likely to be made worse if there are bank or other borrowings backed by personal guarantees. The same problems can occur with a partnership if there is no partnership agreement in place.
Again, Harbour Key have recently assisted a new client who had this issue with a shareholder/director who had left the business but there was no agreement in place to enable their shares to be bought either by existing shareholders or the company.
Action – Dig out the shareholders’/partnership agreement for a review and refresh. If you have no agreement start planning one and book a meeting with a solicitor. Take advice in relation to Inheritance Tax as it is easy to fall into a trap and lose entitlement to 100% relief when drawing up shareholders’/partnership agreements.
Terms & Conditions
Have you reviewed your terms and conditions of business recently or are you still working from a set ‘borrowed’ from another business? It is highly likely that these terms and conditions will be out of date and unfit for purpose. If you have a customer dispute or a non-payer, badly drafted terms and conditions will seriously undermine your legal position and undoubtedly either lead to expensive litigation or an equally costly “walking away”.
For example, if you sell goods and services on the internet, by telephone, via a shop or in your customer’s home, you are likely to be affected by changes in legislation that came into force in June 2014, with those selling online or off-premises seeing the biggest changes. The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 will apply from June 2014 and set out a number of new rules for example cancellation rights and the need for express consent before you can raise a charge.
Advice – Have a solicitor review your business terms and conditions.
Review of Business Protection & Your Will
Have you reviewed your business protections (shareholder protection & keyman) recently? If your business has grown do you have sufficient cover or do you have any cover in place? Is it an expense you have avoided? Have you considered what would happen to the business should anything happen to you, what about your family? Keyman protects the business. Shareholder protection protects the business and your family by providing the business with funds to buy your shares from your death estate so that your family receive some funds relatively quickly.
When was the last time you reviewed your Will? Do you even have one?
Advice –Spend some time googling some quotes for cover, arrange to speak with an IFA and solicitor.
Intellectual Property Audit
Brands and trademarks are at the heart of many businesses, and are amongst a company’s most valuable assets. IP generally (including registered patents, trademarks, design rights, software, etc.) is valuable and the ramifications of not protecting these assets can be serious – theft, loss of reputation, loss of income and reduction in company value. Identifying and recognising your IP and having the right type of protection is essential.
Action: Review your IP – is there anything you can readily protect, for example a trademark can be registered on line for a fee of £175.
Auto Enrolment is upon us and if you have are not already enrolled, you need to spend time now looking into the available options for your business. It takes around six months to implement a compliant pension scheme properly. Don’t view it as a “pain,” but as a very valuable employee benefit to motivate and retain. Failure to deal with implementation on time, will lead to penalties.
Review your Bank/Overdraft/Loan
When was the last time you looked at your Bank and the support they provide? Are the borrowing facilities the best value, are there other options? With the “credit crunch” over, banks are competing for customers, there are a number of new challenger banks on the market looking for trade. Alternatively, why not consider helping your retirement fund with a loan from your pension fund to your company.
Action – Do some internet research re business banking and best lending deals.
I am sure there are a number of other matters that can be looked at in any business, but the above are common ones we come across and are quick easy fixes if you spend the time to pick them up.
Should you wish to discuss any of the above, please do not hesitate to contact us.
Harbour Key Limited
10 December 2015
+44 (0) 1242 244115
+44 (0) 1242 241747