In a YouGov survey, carried out on behalf of business dispute consultants John Kennedy Limited, 52 per cent of SME decision-makers cited cost as the single biggest factor that would prevent them from pursuing a legal dispute. There was a huge gap between that and the next most cited answer, with 12 per cent saying the hassle/effort of pursuing a dispute would most put them off, followed by the damage to business relationships (10 per cent).

Yet 40 per cent of decision-makers were unaware that they could pursue a commercial business dispute using a CFA, which allows businesses to pursue a legal case at no or greatly reduced cost.
Often called ‘no-win, no-fee’, a CFA is a risk-sharing agreement between a solicitor and a client, where they agree that all or some of the legal fees and expenses will only become payable if the client wins the case, and then they are usually recoverable from the losing side. This includes a “success fee”, which compensates the solicitor for taking the risk of not being paid.

Knowing that CFAs are available to businesses made a third (33 per cent) more likely to pursue a legal claim.

However, some wrongly believe the old proverb ‘you get what you pay for’ applies when using a CFA; over a third of respondents (37 per cent) felt they would get a better service if they paid a solicitor by the hour rather than on a CFA. Actually, while the hourly rates encourage inefficiency – because the longer a solicitor takes, the more they get paid – CFAs incentivise solicitors by giving them a stake in the outcome of the case.

“Businesses who think that pursuing a dispute is out of their reach should think again,” said Tina Morgan, founder of John Kennedy Limited. “There are large reputable law firms who will share the risk of taking legal action with them and allow businesses proper access to justice. It also shows both the client and the other side that the solicitor thinks they have a strong chance of winning, otherwise they would not have agreed to work on a CFA in the first place.”

Intuit tested entrepreneurs thinking about starting or already running a business and found many are:

• Without a plan. The golden rule of business is have a plan and yet 16 per cent of aspiring entrepreneurs and 20 per cent of existing business owners do not have a plan or expect to have one by the time they start their business. A plan helps a business stay focused; it is also necessary when applying for external funding.
• Baffled by accounting speak. Entrepreneurs aren’t always financial experts and many find even basic accounting terms confusing. Almost half (47 per cent) do not know the correct definition of gross profit and 31 per cent do not know what turnover means. 19 per cent of respondents do not know what margin means and 16 per cent do not know the correct definition of cash flow.
• Confused by compliance. Only 61 per cent are aware that the VAT threshold is £73,000 and more than one in five (23 per cent) do not know the correct definition of VAT taxable turnover. Tracking, recording and reporting VAT is one of the biggest headaches for small businesses and getting it wrong can have a negative impact on cash flow and leave a business vulnerable to a penalty from the HMRC.

“We want to help Britain’s small businesses get fighting fit,” said Pernille Bruun-Jensen, managing director at Intuit UK. “Too many businesses run out of cash, manage it badly or just don’t have the time or the skills to help themselves out of financial difficulty. In addition to accounting software which can help business owners better manage their finances, entrepreneurs need practical advice and support to feel more confident and equipped to tackle the financial challenges of starting and running a business. Over the next year Intuit will be training more than 1,000 small businesses across the UK as part of a workshop initiative backed by the Department for Business, Innovation and Skills.”

Currently items with a value of £15 or lower can be sent from the Channel Islands – which are technically not part of the EU – VAT-free. This has led to a number of large companies such as Amazon setting up subsidiaries in the islands to undercut local retailers.

At Budget 2011, the Chancellor stated the Government’s intention to take action to end the exploitation of LVCR, which in recent years has been used on an increasingly large scale to sell low value goods to UK customers VAT-free. Most of this trade is from, or via, the Channel Islands.

The Government took the initial step of reducing the LVCR threshold, below which items are imported free of VAT, from £18 to £15. The new threshold came into effect on 1 November 2011 and will apply to goods from the Channel Islands until 1 April next year.

David Gauke, Exchequer Secretary to the Treasury, said:

“These reforms will ensure that UK companies, especially small and medium sized enterprises, can compete on a level playing field with those larger companies with the resources to set up operations in the Channel Islands. We are also protecting a significant amount of tax revenue. By making these changes, we are striking the best possible balance between the costs of collecting small amounts of VAT and protecting the interests of UK taxpayers and businesses.”

Legislation to enact the change will be published in draft on 6 December 2011, for inclusion in Finance Bill 2012.

The HSE has proposed to extend its current systems of cost recovery to include a fee for intervention where an inspector will charge for the inspection and any subsequent actions when a material fault has been found. The HSE estimates that for an inspection that results in a letter, the cost to business could be at least £750.

For a small or micro business, a bill of £750 or more for a material fault could be extremely damaging especially during difficult economic times. The proposal currently states that micro firms will in general receive the same level of fees as large businesses. This will disproportionally affect micro firms as fees of this level will have a greater affect on the ability of the business to function and grow.

The FSB is concerned that small firms may view the proposal as a revenue generating exercise which could damage the HSE’s relationship with business. Worryingly, the proposal fails to clarify whether the money raised would go to the HSE or to the Treasury.  The FSB believes that if it goes to the HSE small firms could fear that their inspection has been influenced by the need to raise money – especially as the context for this consultation is a 35 per cent budget cut to the HSE.

It is important that businesses have a good working relationship with the HSE to allow them to ask for help and support to ensure they achieve compliance. With the possibility of a hefty fee over their heads they may be less likely to want to ask for help and compliance may suffer.

Furthermore, those businesses that wish to challenge the result of their inspection may have to cover the whole costs of the dispute if their complaint is not upheld. The FSB is concerned that many businesses will feel pressured to pay the fees and not appeal even if they have just cause due to the potentially large and undefined costs of a dispute process.

John Walker, national chairman, Federation of Small Businesses, said: “The FSB has a real concern about these proposals as they stand. Not only could they add to the fear that many small businesses have about health and safety regulation, but could have a serious impact on their relationship with the inspector, which if positive can help compliance to the benefit of the business and society.

“£750 is a hefty fee for small and micro businesses especially during difficult economic times. Most small businesses do not have the same resources that larger firms have to buy-in expert help and yet they are required to be experts in a wide range of complicated regulations. Instead of penalising them with large bills, the HSE should be there to help and support small firms to be compliant. For many small firms this proposal will be seen as anti-growth.”

Today’s decision will see the qualification period for the right to claim unfair dismissal extended from one to two years. This will come into force on 1 April 2012. This is the latest development in the Government’s workplace reforms which aim to increase business confidence to take on more workers.

Changes to the unfair dismissal rules follow the ‘Resolving Workplace Disputes’ consultation published in January this year which also proposed measures to encourage early resolution of disputes, the speeding up of the tribunal process and measures to tackle weak and vexatious claims.

These combined proposals should see the number of unfair dismissal claims drop by around 2000 a year.

Business Secretary Vince Cable said: “The priority of this government is to increase growth in our economy. We have one of the most flexible labour markets in the world but there is more we can do to give British business the confidence it needs to create more jobs and support the wider economy to grow.

“Businesses tell us that unfair dismissal rules are a major barrier to taking on more people. So today we have announced that only after working for the same employer for two years can an employee bring an unfair dismissal claim.”

A key part of the Government’s growth strategy is to create the conditions which allow businesses, particularly SMEs, to grow and expand by reducing regulation and maintaining a flexible and dynamic labour market.

Over the past 18 months, the Government has started a fundamental Employment Law Review to ensure that it is fit for purpose, that it properly balances the needs of employers and employees, and provides the competitive environment required for businesses to thrive.

For the next three weeks the Red Tape Challenge will focus on more than 160 different cross-Government employment related regulations that businesses have to deal with in all areas of the workplace.

The campaign asks for a variety of suggestions about how regulations can be improved, simplified or even abolished, whilst also ensuring that the current standard of employment rights for employees are maintained. Examples of regulations which Government is seeking views on include the rules on collective redundancies, employment agencies, immigration checks, the National Minimum Wage and statutory sick pay, to make sure they are fit for purpose and easier for businesses to understand.

“Simpler Reporting for Smaller Businesses’ sets out ideas to reduce the amount of reporting micro-entities would be required to undertake. This could benefit around 5 million businesses and result in considerable cost savings in relation to the preparation of their accounts.

The paper proposes easing corporate reporting procedures so that micro-entities are only required to file a simplified Trading Statement (in place of the current Profit and Loss account), a simplified Statement of Position and a simplified Annual Return.

The paper also proposes developing an integrated software package to help small businesses prepare financial information. This could allow managers to gain a better understanding of the trends in their businesses’ performance and help them plan for the future.

The minister responsible for corporate governance, Edward Davey said: “Reducing unnecessary regulatory burdens on the smallest businesses can give them the freedom to innovate and grow – which ultimately benefits the entire economy and is absolutely central to the Coalition’s vision for Britain. A new deregulation from EU rules targeted at micro businesses means we now have a chance to deliver these benefits.

“The financial reporting regime must also serve the users of the information published by companies – whether they are customers, banks or government agencies. So we look forward to receiving responses to our proposals from a broad range of interested parties in the coming months”.

According to figures obtained the number of Members Voluntary Liquidations (the technical term for the voluntary liquidation of companies) rose to 3,578 in 2010, up from 3,268 the previous year as businesses continue to cut costs.

According to McGrigors commercial law firm, businesses are increasingly looking to streamline their complex corporate structures. McGrigors explains that many companies will have gradually acquired complex corporate structures over time – through takeovers and organic growth – which are now inefficient.

Paul Sutton, Corporate Partner at McGrigors, says: “Closing a redundant corporate entity can save up to £20,000 in administrative costs every year.”

“Businesses are increasingly looking to review their corporate structures and actively reduce administrative costs so they are in better shape going forward.”

“Historic tax planning may have prompted some businesses to implement complicated legal structures. However, the tax benefits may no longer justify the ongoing costs of maintaining those complex structures.”

“Companies will also be keen to help directors comply with their legal obligations by merging subsidiaries and reducing the number of director roles that they have.”

“Changes in business plans during the recession may have left some subsidiaries as simple legacies. Company directors will now be keen to ensure that their businesses are as streamlined as possible as they embark on the next phase of growth.”

McGrigors adds that the overall number of company liquidations has fallen by 16% over the last year.

Paul Sutton says: “The rise in the voluntary closure of subsidiaries may not sound like a big increase – but in the context of a large drop in overall liquidations, this is an extremely significant rise.”

“The cost savings of closing subsidiaries can be immense. When you consider that companies often have hundreds of global subsidiaries, it can add up to a very significant saving.”

The Forum of Private Business believes revised guidance for the new Bribery Act will make it easier for small businesses to understand their obligations when new legislation comes into force on July 1st, 2011.

The new guidance acts as a way of clearing up confusion and apprehension surrounding the introduction of the Act and the impact it could have on SMEs.

Widespread concerns had been raised over the legality of corporate hospitality under the Act, with questions whether or not business owners could fall foul of the new laws simply by entertaining their clients.

Many business owners were also worried that they may have had to put in place time-consuming internal procedures in order to comply with the new legislation and guard against prosecution, irrespective of the nature of their business.

However, the new guidance for businesses states that these concerns are unfounded.

It explains that normal methods of entertaining clients will not be outlawed and SMEs only need to put new anti-bribery processes in place if they believe they are at high risk of exposure to bribery – for example, if they carry out a lot of overseas work in countries with a known culture of corruption.

Forum chief executive Phil Orford said: “I think it’s fair to say that the new guidance is a big improvement on the previous draft guidelines published last September and will make it much easier for SMEs to understand their obligations.

“Obviously, the guidance around any new legislation has to have a certain degree of vagueness because the law is often highly dependent on particular circumstances, and the Government has to be careful not to make businesses think they are complying with the law when they are not.

“However, as far as is possible, the new guidance explains what businesses do and don’t need to do in plain and concise English. It also emphasises a ‘common sense’ approach to complying with the legislation, which will come as a breath of fresh air to the many business owners who spend a lot of their time trying to interpret confusing legalese in regulatory literature.”

The Forum has expressed concerns that the Act itself could have a disproportionate impact on smaller firms due to the costs associated with ensuring compliance.

While larger businesses often have in-house legal and HR expertise which can be used to interpret and implement their requirements under the Act, smaller companies rarely enjoy such resources, placing them at a competitive disadvantage.

If found guilty of an offence through the Bribery Act, company directors could be jailed for up to 10 years and the business itself can be hit with an unlimited fine.

As a result, the Forum is urging small and medium size business owner-managers to familiarise themselves with the guidance and take any necessary steps to ensure they do not fall foul of the new legislation.

Mr Orford added: “The intentions behind the new Act are understandable – it’s about ensuring business is won on merit, rather than going to the companies with the deepest pockets, and a lot of smaller firms will welcome that.

“However, as with other legislation, the Act is likely to have a disproportionate impact on smaller businesses – particularly SME exporters who, after much recent encouragement from the Government, are just starting to promote their products overseas and trying to break into foreign markets.

“This is where membership of a support organisation like the Forum can be invaluable. We can help level the playing field for small businesses by providing them with all the back office facilities of a large company.”

The new Bribery Act guidance can be found in the ‘guidance’ section on the Ministry of Justice website.

Vince Cable

The Reducing Regulation Committee discussed its fundamentally different approach to regulation and began its major review of all regulations in the pipeline.

The Committee has the power to send burdensome red tape back to departments and also guarantees that all other options have been considered before more regulations are introduced.

Vince Cable said: “As the deputy prime minister said, we need to change the balance of power away from the state and back to individuals, businesses and communities. For too long, there has been a misplaced notion that Government’s job is to regulate. That is not the case. Regulation should be the last resort.

“This committee, along with the new “challenge group”, will help change the culture of Government and find new ways of solving problems, reducing the red tape that is strangling enterprise.

“We need businesses to drive the growth our economy needs, not be tied up with form filling, and the Government is determined to do all it can to make that happen.”

Policy chairman at the Federation of Small Businesses Mike Cherry welcomed the move: “Small businesses want to grow, but are stifled by red tape and excessive legislation, with 33 per cent of FSB members citing regulation as the biggest obstacle to growth in 2009.

“We have seen similar initiatives from previous administrations and we hope that the Government puts the needs of the 4.8 million small businesses in the UK first.”

John Wright

Ahead of the Conservative Party Conference in Manchester, the FSB outlined its proposals for creating and saving more than 300,000 jobs, and called for a moratorium on all new business regulations and a rapid simplification of confusing bureaucracy.

A survey of FSB members showed that nearly one in three businesses (27 per cent) that wanted to expand said they were too scared to do so, because they were put off by complicated regulation. Of those businesses planning to downsize or close, 50 per cent said their decision was strongly influenced by the regulatory burdens they faced.

According to the Government’s own figures, 60 per cent of businesses listed regulation as an obstacle to success. Based on these statistics, the FSB estimates that removing these regulatory obstacles could create more than 258,000 new jobs and save more than 55,500 from being lost.

In a new policy paper entitled Regulatory Reform – a route to economic recovery, the FSB is proposing an overhaul of the UK’s regulatory structures, calling for:

• A moratorium on business regulation: to boost the chances of job creation, the Government must halt all new regulation during the recession and for the first 18 months after recovery.
• Accelerated simplification of current laws: employers are currently confused and put off by maternity and paternity law; discrimination law; and health and safety legislation. All of these must be immediately simplified.

John Wright, national chairman, Federation of Small Businesses, said: “We cannot and must not underestimate the burden that unnecessary regulation puts on small businesses. Around half of all firms planning to close or downsize were influenced in that decision by the heavy impact of regulation.

“However, we know that small firms want to employ more staff and the Government should be making it easier for them to do so, especially as we pull ourselves out of recession and into recovery.

“The FSB is urging the Government to give the UK’s regulatory environment a strategic overhaul, to provide it with what will amount to a second economic stimulus, to boost growth and employment.”