Much of Lord Young’s report is drawn on statistics from the BIS Business Population Estimates with at least one of the graphs in Lord Young’s report having been lifted directly from the Business Population Estimates.

On page 1 of his new report Lord Young asserts that out of all of the businesses in the UK “3.6 million are sole traders without employees”. On page 3 of the report he asserts that there are “4.8 million firms in the UK today … three quarters of these firms are sole traders”. So he is making two assertions about sole trader:

1) They represent three quarters of all businesses

2) That there are 3.6 million of them with no employees.

Lord Young does not cite a source for the second of these figures but he does for the first, claiming that it comes from “BIS Business Population Estimates for the UK and regions 2012”. If we check this report for ourselves we can see that their figures for the percentage of UK business which are sole traders is 62.7% not the 75% claimed by Lord Young.

It would appear that Lord Young also got his second figure, that there are 3.6 million sole traders without employees, from the same report. Unfortunately he seems to have misread this statistic as well. The BIS statistics state that there are 3,557,255 businesses in the UK with no employees.  However if you read the footnotes you will see that these are made up from “sole proprietorships and partnerships comprising only the selfemployed owner-managers(s), and companies comprising only an employee director”. So the 3.6 million figure Lord Young cites includes lots of people who are not sole traders. To get the figure of just sole traders with no employees you have to look 4 pages further down the same report.

The figure given by the BIS report for the number of sole traders in the UK is 3 million of which 9.9% have employees leaving the number of sole traders with no employees as around 2.7million. This is obviously a substantial difference from the figure of 3.6 million cited by Lord Young.

While I am sure that there is much of value in Lord Young’s work it is a little worrying that he appears to have based his findings on incorrect data.

What is the Simplified Expenses scheme?

Simplified Expenses do not change HMRC’s definition of business expenses. Expenses are business costs which you deduct from your profit to reduce the amount of income tax you pay. The Simplified Expenses system gives you flat rates to claim for 3 areas of the business which are particularly difficult to work out:

• motoring costs;
• expenses of running a business from home, and;
• private use of business premises.

All other expenses still need to be calculated in the usual way.

When will Simplified Expenses be useful?

UK tax law states that you can only claim the costs which relate directly to your business. This can be difficult to quantify for charges where your personal and business usage is billed together. Things like your electricity bill for your home-based office, or insurance on a van you use for business and personal travel, fall into this category.

Do I have to use Simplified Expenses?

No, sole traders and partnerships can decide if the scheme will suit their business and they can choose which elements of Simplified Expenses to implement. Limited Companies and Limited Liability Partnerships are not permitted to use Simplified Expenses.

How do I use Simplified Expenses for motoring costs?

To claim business expenses for vehicles, you’ll use a flat rate to claim business mileage instead of claiming the actual costs of fuel and maintenance. HMRC have set out the following flat rates:

You’ll still need to keep a record of the number of miles travelled, but you won’t need to keep track of the running and maintenance costs. You can still claim all other travel expenses (eg train journeys) in the usual way.

You don’t have to use flat rates for all your vehicles but once you’ve chosen to use them for a vehicle you must stick with this as long as you use that vehicle for your business.

How do I use Simplified Expenses for business use of my home?

Instead of attempting to calculate the exact usage for separate utility bills for your home office, you can claim a flat rate for business use at home, based on the number of hours you work from home. This means that you will no longer need to work out what proportion of each utility bill is from business use.

HMRC have provided the following flat rates for claiming the expenses of running your business from home:

You can only use this part of Simplified Expenses if you work 25 hours or more per month at home. You use your home for business if you:

• provide the goods and/or services of your business from your home (this doesn’t include time spent at someone else’s premises;
• maintain your business records at home;
• time spent on marketing and generating new business at home.

How do I use Simplified Expenses for private use of my business premises?

A small number of businesses use their business premises as their home, like those that run a B&B, guest house or care home. In these cases part of the business expenses will be from private usage.

With Simplified Expenses you deduct a flat monthly rate for private use from your total expenses. The flat rate depends on how many people use the business premises each month as a private home. HMRC have set out the following flat rates:

Like using your home for your business, it can also be difficult to work out what proportion of business premises expenses are from personal use. With Simplified Expenses you don’t have to work out how much of the expenses are from private use.

No matter which method you use, there is a lot involved in working out your business expenses. Simplified Expenses provides basic formulae to follow which will reduce the time you spend working it all out and gives you more time to focus on growing your business. Simplified Expenses will not suit every sole trader, but it may be worth-while to look into if any parts of it could be useful to yours.

The Company Warehouse offer free accountancy advice. For help determining if you can use Simplified Expenses, and assistance completing your annual self-assessment tax return contact your business consultant or call 0800 0828 727 now.

What is Cash Basis?

This is a way for small businesses to report their income and expenses on money that has actually gone through the business. Cash Basis will be used instead of traditional accounting (accruals basis). Accruals basis requires that businesses pay income tax on projected earnings and expenses, based on when the transaction takes place, not when the cash is received.

Why would Cash Basis be beneficial?

Many small businesses across the UK struggle to be paid on time for goods delivered or services rendered, but still had to pay income tax on those transactions. The big advantage of Cash Basis is that those who qualify to use it will not have to pay tax until the money is received.

Who can use Cash Basis?

Sole traders and partnerships with an annual turnover of £79,000 or less can use Cash Basis. There are some exceptions, and even if they qualify, businesses can choose not to use Cash Basis and continue to use accruals basis.

Who can’t use Cash Basis

Limited companies and limited liability partnerships can’t use Cash Basis. There are also some specific types of businesses that can’t use the scheme:

• Lloyd’s underwriters
• Farming businesses with a current herd basis election
• Farming and creative businesses with a section 221 ITTOIA profit averaging election
• Businesses that have claimed business premises renovation allowance
• Businesses that carry on a mineral extraction trade
• Businesses that have claimed research and development allowance
• Dealers in securities
• Relief for mineral royalties
• Lease premiums
• Ministers of religion
• Pool betting duty
• Intermediaries treated as making employment payments
• Managed service companies
• Waste disposal
• Cemeteries and crematoria

Do I only declare cash I receive?

No, Cash Basis requires that you pay income tax on all money you’ve actually received. All types of payments count, not just payments in cash. Any money your business receives by cash, cheque, card, payment in kind, or any other method needs to be declared. If your business is waiting for payment, you’ll only need to pay the tax when you receive the money.

What expenses does Cash Basis include?

Cash Basis does not change the type of expenses you claim, just when you can claim them. With Cash Basis you can only claim for expenses you’ve already paid. If you owe money for an expense, you can only claim for it once you’ve paid for it.

Can VAT registered businesses use Cash Basis?

Yes, VAT registered businesses can use Cash Basis provided their annual turnover is lower than the VAT registration threshold (currently £79,000 per annum). If your business grows while you are using Cash Basis, you can stay on the scheme provided your income is less than £158,000, but if it’s greater than that you will have to use traditional accounting for your annual tax return.

When and how do I report using Cash Basis?

You can start using Cash Basis from the 2013 to 2014 tax year by ticking that box when you submit your 2013 to 2014 self-assessment. You can report income and expenses either with or without VAT, but they both need to be reported in the same way.

Cash Basis will not suit every business, and many businesses will not be able to use it. The scheme may be beneficial for small businesses as it will be easier to budget for the self-assessment tax return.

The Company Warehouse offer free accountancy advice. For help determining if you can use Cash Basis, and assistance completing your annual self-assessment tax return contact your business consultant or call 0800 0828 727 now.

Phone systems may not be the first thing that you think about when starting a new business but they can be important to the success of your company. When you first start-up every sale matters and being able to contact customers and allowing them to contact you is essential. If you start-up on your own this can be pretty simple, all you will need is a phone and voicemail. But as you start to grow and add employees you will need to think about things like hunt groups and call queuing.

These are the parts of the system which automatically distribute calls among your sales team or keep people on the line while they wait for a support technician to come free. Traditionally this would be done through the installation of a Private Bank Exchange (PBX) box and a lot of hardware in the corner of your office. As well as being expensive these systems are fairly inflexible and generally need a specialist engineer to reprogram them if you want to make changes. Increasingly small businesses are turning to cloud hosted VOIP systems as an alternative.

VOIP stands for Voice of Internet Protocol. It is basically a way to make phone calls over the internet, a bit like services provided by Skype and Google. The difference with business VOIP systems is that all of this is done in the background. The phone on your desk looks like a normal phone and calls can be made and received in the normal way. Your average user would not realise they were making calls over the internet.

One of the big advantages of a hosted VOIP solution is that all of the set-up and switching is done online so you do not need any equipment in your office. If you want to change what order your phones ring in or who is part of which teams it can be done by logging onto a website rather than by calling out an engineer. This potentially saves you a lot of time and money. Because all of the technology is online it also means that if a member of staff wants to work from home they can simply take their handset with them and it will function as if they were in the office. They will still be able to make internal phone calls and will be part of hunt groups and teams. Similarly if you have sales reps who are out of the office a lot you will be able to make their mobile act as if it is part of the phone system.

Of course another big advantage of VOIP systems is that, like Skype which works on the same basic technology, the call costs are massively reduced compared to traditional phone lines. Added to the savings of not having a PBX set-up this means that choosing VOIP can represent a big reduction in running costs for small businesses.

Of course VOIP is not suitable for every business in every case but it is something worth considering when looking at phone systems. The biggest factor in the success of VOIP systems is often the broadband connection on which it runs. A normal home broadband connection will typically support one VOIP call with reasonable call quality. Once you need to be able to do more than that you will more than likely need to get a broadband line which has been configured for VOIP or get a superfast fibre line. Without this you will see a rapid breakdown in call quality or simply be unable to make and receive calls. While the cost of advanced broadband and fibre lines is dropping they are still not available in all locations so it is worth checking that you can get one before you get too far down the VOIP route.

Funding for Lending is the latest in a series of government initiatives to get the banks to lend to small businesses. As we have reported before, serious doubts have been raised about the effectiveness of this scheme, with the Bank of England reporting that it has left the availability of funds for SMEs “little changed”.

Despite the apparent lack of impact the Funding for Lending scheme has had so far the government is poised to announce its expansion. The scheme had originally been intended to last until 2014 but is now being extended into 2015 and the organisations involved are also changing. As it was originally set up Funding for Lending allowed the banks to borrow money from The Bank of England at below market rates on the condition that they lent it to small businesses and first time buyers. The figures that have emerged since the scheme started indicate that although the banks were borrowing the money they were not lending it out to the intended groups. Instead it appears that a large chunk of the money has gone to Buy to Let landlords and very little of it has gone to small businesses.

As the banks are not using the Funding for Lending money in the way the government intended they are now expanding the scheme to ‘alternative’ lending providers. The government has already been investing heavily in invoice financing and they are going to use Funding for Lending to pump more money into this sector. They are also going to be opening Funding for Lending up to leasing companies and asset financing companies more generally. Their logic for doing this is that these are the types of organisations which regularly work with small businesses already. So, for instance, if a small business wants to buy some new IT equipment they would often do it through a leasing company. This leasing company will now be able to fund the purchase by borrowing the money at very low rates from the Bank of England. The idea being that because it is cheaper for the leasing company to borrow the money they will be more likely to lend to small businesses and may also pass on some of the savings.

Of course this was the logic that was supposed to see the banks increase their lending to small businesses and it has not worked. It will be interesting to see over the coming months whether Funding for Lending works when the banks are bypassed.

This may well be one of the last paper forms I submit to the government. 2013 has seen a huge number of changes to the way the government communicates with individuals and businesses. Many aspects of forming, and then reporting on the activities of a business have changed. Most paper forms and supporting documents have either been replaced with online equivalents or are now completely void.

The Government Gateway allows access to everything from personal details for council tax, to PAYE online for employers. Government bodies such as HMRC, DWP, DVLA, and the Environment Agency all require you to use a Government Gateway to access your information (though you still can’t change your name with the DVLA online).

This system, like any, comes with benefits and limitations. On the plus side, it reduces the amount of paper correspondence between individuals, businesses and agents with government authorities. On the down side, it takes two weeks for the Government Gateway login details to come through, delaying initial submissions and requests. This means that it can actually take longer to do things online, at least the first time you do them.

Whether you see the system as a more convenient way to communicate with the government, or a complicated way to access your own information, it is becoming necessary for almost all businesses to use it. Though the benefit of accessing your details in one area is clear, this web-based portal can be difficult to navigate if you’re new to it, introducing additional delays and obstacles to the process of starting a business.

Here are five ways the Government Gateway has changed the process of starting a business:

• When HMRC have been advised by Companies House that a limited company has been formed, they will send a CT41G to the registered office address. The CT41 used to be a form to complete. Now it’s a letter which tells you your unique tax reference (UTR) number. It also tells you to register with the Government Gateway, so you can notify them that the company is active or dormant.
• HMRC are encouraging businesses that need to (or want to) register for VAT, to do so online, though at the moment you are still able to complete the VAT registration on a paper form. However, even if you don’t use HMRC’s online services to register for VAT, you will still have to submit your VAT Returns online.

• Almost all limited companies and organisations must submit their Company Tax Returns online. Also, any Corporation Tax that’s due has to be paid electronically.

• Tax c calculations and, with very few exceptions, the accounts that form part of the Company Tax Return, must be submitted in Inline eXtensible Business Reporting Language (iXBRL) format online.

• Most recently, HMRC have introduced Real Time Information (RTI) reporting. All PAYE registered businesses need to be RTI compliant and use HMRC approved software.

Following the UK 2011 Census, the ONS (Office for National Statistics) reported that the population of the UK was 63.2 million. They also reported that 77% of households had access to the internet., Starting a business is now incredibly difficult if you don’t have internet access. The 23% of households in the UK without internet are therefore automatically disadvantaged.

The Company Warehouse have a Government Gateway agent user ID which allows us to deal with the potentially complicated, time consuming tasks of communicating with government bodies on behalf of our customers. Call our Business Consultants now on 0800 0828 727 to find out we can form a Limited Company for free, register you for VAT and make RTI PAYE submissions on your behalf.

Though experiential marketing campaigns often include something free for customers to take away after the experience, it is not to be confused with offers which promise a free-trial period. The customer interacts with the product or service and a host such as a brand ambassador, leafleter or demonstrator guides the customer through the experience.

Media and print marketing can be expensive because success relies on volume, and it’s very difficult to track success. This is especially true now that you can mute or fast forward the adverts on TV, and bin the copious amounts of fliers through your letterbox.

Experiential marketing allows customers to engage and interact with brands, products, and services in sensory ways that provide the icing on the cake of providing information. Personal experiences help people connect with a brand, and make intelligent and informed purchasing decisions. When done right, it’s the most powerful tool available to win brand loyalty.

Enormous amounts of time and money go into researching product and brand development. Without strategic marketing the product sits on the shelf hoping to be purchased, and the service just waits on the web eager to be discovered. Marketing strategies create a link between the product or service and the consumer and this link can be created in various ways.

Acccording to MarketingWeek, “customers don’t necessarily follow the lowest price, but return to trusted brands that have proved their worth over time”. Active marketing ensures your brand is noticed by the customer who it’s intended for.

Any marketing campaign will include a brand message which customers can take with them and help them remember the brand, its benefits and features. When the brand message is accompanied by something the customer can feel, hear, see, taste or smell then the chances of remembering the message increase. The experience could be anything which allows to customer interact with the product and may include leafleting, sampling, interactive games or activities, immersive theatre and competitions.

New brands take advantage of experiential marketing because their customers need to be educated on all aspects of their brand. Businesses that are re-branding make use of experiential marketing to equal effect because their existing, happy customers will need to know that the same brilliant product or service is being offered, and less than happy customers will need to know what has been improved.

Likewise, this is a great opportunity to pick up new customers and allow them to experience the brand. Similarly, brands that haven’t seen as many sales as initially hoped for can also use experiential marketing to great effect.

Expert experiential marketing agencies will provide everything from staffing and uniforms to venue hire and an end of campaign report. These are worth the pennies you pay, as Shaz Smilansky, author of Experiential Marketing: A practical guide to interactive brand experiences, explains, “experiential marketing provides better ROI than other marketing activities in use”.

It can however be very expensive, especially if your business is small, and doesn’t have the seemingly limitless marketing budget that large corporations have. Making experiential marketing work for your business can be really simple and affordable. As each business is unique, the way to engage with your consumer needs to be unique too.

Think about the following, and then get creative. Remember that the most important thing is to allow your customer to experience your product or service before they hand over their cash.

• Distribute fliers either in the town centre (permission from the Local Authority may be required), or through letter boxes. The fliers could include a money-off coupon.
• Offer free samples in store. Make sure you display any warnings which would usually be on the packaging – contains nuts, hot content, etc.
• Create a friend referral scheme. This can be as simple as offering a % of both parties’ next transaction for free.
• Offer low introductory rates. For example you could offer 3 services or products for the price of 2 for a limited period.
• Host an open event. Invite customers and their friends to visit your new office or shop, find out about what your business offers. Include light refreshments and a freebee to take away.

Don’t miss out on sales opportunities because your product is unknown or new. Give your customers every opportunity to gain trust, build conviction, and remain loyal. Be creative, engaging and informative. Find out more about the services we offer and other ways to build your brand at www.thecompanywarehouse.co.uk

The introduction of RTI will not just impact businesses with traditional employees. It will also impact on a lot of small limited companies run by contractors or other ‘one man bands’. Directors of limited companies are technically seen as employees and as such are normally registered for payroll. Where a limited company has only one director, and therefore one employee, they will still have to comply with RTI and report their salary in real time. Even if no salary is taken from the business returns will still have to be sent to HMRC at least every quarter recording the lack of payment.

Because RTI is going to be such a big change, and because it is likely to catch a lot of people out, HMRC are being fairly lenient in their approach to fines and penalties. They have said that for the first year of RTI (tax year 2013 to 2014) they will not fine people for making late monthly submissions. In the main they will keep the same penalties in place as have applied for traditional PAYE while expecting people to report in real time.

Recently HM Revenue and Customs have also announced that some small businesses will not be expected to comply with RTI at all for the first six months. Businesses with less than 50 employees who pay their employees on a weekly or casual basis will not be expected to comply with RTI until 5^th October 2013. While this will not impact a massive number of companies it does mean that those with complex arrangements will have some breathing space.

While HMRC are offering some exemptions and being lenient with people on initial compliance it is still a good idea for anyone involved in running a business to understand their exact requirements. There are various ways to comply with RTI including purchasing specialist software and outsourcing payroll services. One option which is now running out is to do the RTI payroll yourself using the HMRC’s free tools. In order to make use of the HMRC’s RTI tools you will need to register for one of the new government gateway passwords. Typically these are taking around 2 weeks to arrive at the moment which will put you beyond the RTI start date.

Our Free RTI How To Guide gives details of all of the options for complying with RTI as well as details of which businesses have to comply with the new rules. You can download it from our website or give us a call on 0800 0828 727 to make sure your business is RTI compliant.

The 2011 report on entrepreneurship in the UK by the Global Entrepreneurship Monitor (GEM) showed that the age group with the second lowest entrepreneurial activity was 18 to 24 year olds. The only age group with lower entrepreneurial activity were 55 to 64 year olds. According to the GEM report the most popular age to start a business is 25 to 24 years old with 35 to 44 years old being the second most popular age group. This is mirrored across many economies with a similar pattern of ages and entrepreneurial activity in regions as diverse as Sub-Saharan Africa and the Caribbean. One of the few countries that bucks this trend is Germany where 18 to 24 year olds form the majority of those involved in entrepreneurial activity.

The relative lack of entrepreneurial activity in 18-24 year olds has been used to explain why the UK government recently has to expand its Start-up Loans Scheme to 30 year olds after a poor uptake. However some research suggests that 18 to 24 year olds may not be the best age group to be starting businesses. Work from the Founder Institute suggests that 28 and over is a good age to be starting a business with 34 as the ideal age. The reasoning they give for this is pretty straight forward. 28 to 34 year olds are likely to have some experience of management, completing projects and operating in a business environment. The same research suggests that the most effective entrepreneurs tend to be starting businesses in industries where they have previously been working or where they have some experience. This means they are more likely to be able to spot gaps in the market and have the connections and knowledge to get their start-up working.

Without the advantages of real world industry experience 18 to 24 year olds are likely to face more of an uphill struggle getting their business off the ground. This is why the Start-up Loans Scheme and organisations such as The Princes Trust which work with young entrepreneurs place a lot of emphasis on the role of business mentors. These are often experienced business people who have been through the process of setting up a business before and know what to do and what to avoid. While it is good that young people are being helped to start their own businesses, especially in a time of high youth unemployment, some people have called for government start-up support to be expanded to encompass all age ranges. The Federation of Small Businesses (FSB) have made the extension of the Start-up Loans scheme to all age ranges part of their wish list of the next budget. With the majority of new business founders not being in the 18 to 30 age range it would make sense for support for start-ups being extended to those most likely to start a business.

Whatever your age The Company warehouse can help you to start your business with free consultancy and guidance. Browse our company formation and business registration packages online or give us a call on 0800 0828 727.