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How Do I Set Up Payroll for the First Time?

How Do I Set Up Payroll for the First Time?

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Incase no one has told you today.... You rock. You’ve started your own business, and now you’re at the point where you’re ready to employ new people and set up payroll.

Below are a few insights from the Mushroombiz team on all the tools you need to successfully set up payroll for your business and get things moving.

To run the payroll you need to have the following:

 

  1. Setup the PAYE account with HMRC.

In order to run the payroll, a company must first submit their application to HMRC to register for payroll PAYE account. HMRC normally takes 3 to 4 weeks to process the PAYE applications. So it is best to plan ahead and get this registration out way. Without company PAYE account, you won’t be able to run the payroll. We (Mushroom) can register you with the HMRC for PAYE account.

 

  1. Company Auto enrolment pension account registration:

Once you have registered with HMRC, the next step is to register your company’s workplace pension account with a pension provider. It is your choice who do you want to go with for pension provider company but most of the companies register their account with NEST or People’s pension. You can read about these two pension providers by doing a google search. Per pension regulator rules, if a company has eligible staff that need to be put on company workplace auto enrolment pension, then the company must have the workplace auto enrolment pension account so it can comply with employer’s duties relating to pension enrolment etc. We (Mushroom) can sort the pension registration for you.

 

  1. Staff employment contracts:

You do not need to wait to sort employment contracts of your staff as it can be sorted before point 1 and 2 or you can sort this along with the point 1 and 2. The idea is, have everything in writing and get them signed by your staff so you have your staff have their written employment contracts so both parties are on same page which can avoid a lot of employment disputes. Also it is the best practice to have the employment contracts written, agreed and signed by all parties. Our (Mushroom) HR department can help you with this which will mean that all your employment contracts are done by an expert and therefore you have a piece of mind.

 

  1. Staff payroll forms:

After once you have the employment contracts done, you can now ask your staff to complete the payroll forms which will have their personal details which are needed to put them on payroll software and process their salaries. Our payroll department can sort these out for you and ensure we have the relevant information to put them on payroll and process their salaries.

 

  1. Process payroll:

Now you have all the necessary information you need to have to process the payroll for the relevant month. But having said that, you do need to have a payroll software in order for you to process the payroll and submit the return file to HMRC and share the payslips with your staff. We can sort this out for you as if you want us to run the payroll for you then we can do it for you and you don’t need to purchase any payroll software. This would mean that you don’t need to process the payroll yourself, learn the payroll software and going through the hassle of admin work involved in payroll. If we are processing your payroll then we will sort everything for you and submit the PAYE return file to HMRC and also pension return to the pension company and then share the payslips with your staff. You just need to let us have the payroll information of each staff each month and we will sort the payroll for you for each month.

 

  1. Pay salaries, HMRC PAYE liability and pension liability :

Once the payroll is processed for the relevant month, the next stage is to make sure you pay your staff on the pay date and also pay HMRC PAYE liability and pension liability to your chosen pension company each month. We can sort this as well for you making sure that payment has been setup on your bank before the deadlines to ensure staff, HMRC and pension company is paid on time.

 

Interested in in more information or setting up payroll for your business? Contact the Mushroombiz team and we'll get you sorted.

 

What if an ex-employee has taken confidential information to their new job?

What if an ex-employee has taken confidential information to their new job?

When an individual moves to a new role, they take valuable skills and knowledge which they will use for the benefit of their new employer.

 Where this happens, particularly where an employee moves to a competitor, it can be difficult to draw a line between information that an employee can legitimately use in their new position as part of their own experience, and specific information which should not be disclosed even though the terms of their former employment contract have ceased to apply. The ‘Trailfinders’ case last year illustrates these issues, which many will find highly relevant.

 Below we set out the law and then examine details of the case.

 

What information might an employee access?

Established case law broadly identifies three classes of information to which an employee may gain access during the course of their employment, and how they might be permitted to use it going forward.

 

  1. Information which is not confidential (e.g. information already in the public domain): An employer cannot impose any duty of confidence on its employee in respect of such information, simply because the information is not secret. It can be freely disseminated, shared, and used by the employee when they move to a new employer.

 

  1. Confidential information acquired during the normal course of employment which remains in the employee's head, and becomes part of their own experience and skills: The general duty of good faith owed by an employee to their employer means that this type of confidential information should only be used for the benefit of their employer, and restrains the employee from misusing such information (such as disclosing the information to the employer's competitor) – during the course of their employment. However, this duty comes to an end upon termination of employment. If it is carried away in the employee's head after the employment has ended, it may then freely be used for the benefit either of themselves or others (such as their new employer).

 

  1. Confidential information in the form of specific 'trade secrets': The general duty of good faith owed by an employee to their employer also applies to this type of confidential information. Such confidential information (e.g., a secret process of manufacture, such as specific chemical formulae, or designs or special methods of construction) may not be used by the employee, whilst they remain secret, for anything other than the benefit of the employer – and this obligation extends beyond the course of their employment. An employee must not disclose or otherwise misuse such confidential information even after cessation or termination of employment.

 

How these classes of confidential information interest:

 

Whilst seemingly simple, drawing a distinction between the different types of confidential information set out above is not always straightforward. Employees and potential employers need to beware that simply because certain information might fall within one of the above classes does not necessarily mean it can be freely used or disclosed after the end of the relevant employment.

 

  • Where the ‘remains in their head’ class of confidential information has been retained by copying a document or deliberately memorising the information whilst still employed: although such acts may only become known after the employee has left their previous employment, case law confirms that such activities undertaken whilst still employed are liable to constitute a breach of confidence to the former employer (as a breach of their duties whilst in employment)

 

  • Where such confidential information is not exploited to earn a living but is sold off to a third party: the possibility of liability where, instead of using their skills and experience to their own (or their new employer's) benefit, the ex-employee sells such confidential information to a third party, is still open to be determined by the courts.

 

 

The Trailfinders case

 

Trailfinders Limited ("Trailfinders"), issued a claim against four of its former employees, alongside rival agency Travel Counsellors Limited ("TCL”). Trailfinders claimed that, after leaving in 2016 to join TCL as travel consultants, these former employees had made use of Trailfinders' trade secrets, in breach of implied terms of their employment contracts and/or equitable obligations of confidence owed to Trailfinders. Trailfinders also alleged that TCL acted in breach of confidence through having received its confidential customer information and having allowed its former employees to exploit such information for TCL's benefit.

 

Was the relevant information confidential?

 

In the case, the judge firstly had to satisfy himself that information relied upon by Trailfinders was in fact confidential, i.e., to establish whether it could fall into class 2 or class 3.

 

The types of information relied upon ("Client Information") included:

  • Clients' names, nationalities, dates of birth, passport details, and frequent flyer numbers
  • Clients' contact details (home addresses, telephone numbers, email addresses)
  • Past and provisional trips booked with Trailfinders (including itineraries, hotel bookings, flight details and prices)
  • Booking reference numbers (used by clients to access Trailfinders' online trip portal, Viewtrail)
  • Details of clients' budgets, interests, preferences, special requirements and booking trends (e.g., for anniversaries or honeymoons)

 

The judge concluded the Client Information was Confidential information acquired during the normal course of employment which remains in the employee's head and becomes part of their own experience and skills.

He dismissed TCL's argument that the Client Information could not be confidential because it had not been sufficiently protected by Trailfinders, on the basis that it could only be accessed via an ID and alphanumeric password allocated to each employee, plus the individual client. He also rejected submissions that Trailfinders had not made its employees aware of the confidential nature of such information and at least some of the information was publicly available.

 

How had the former employees procured the Client Information?

 

Whilst compiling a list of contacts and relevant information to be uploaded to TCL's system ahead of his starting date, one of the ex-employees took details of a 'small number' of clients from Superfacts (Trailfinders' software system) by copying the information onto a sheet of paper on the last day of his employment. It was suggested that this was simply for expediency, and that the information could have been obtained from other sources (such as his own knowledge, personal accounts/devices and publicly available sources). As such, the defendant argued that the information he took from Superfacts was not confidential. In fact, details for more than 200 contacts were passed to TCL by the defendant.

 

One defendant had also printed hard copies of information relating to a specific client, where D2 was in the process of booking two large trips for the client. They wanted the information so he could complete the bookings after he left Trailfinders.

 

The other ex-employee had started to assemble his 'Contact Book' – containing the names, contact details, booking reference and other information about 136 of his clients – about six months before leaving Trailfinders. He acknowledged most of the information in the Contact Book had come from Trailfinders' Superfacts system.

 

In addition, the defendants admitted accessing Viewtrail (Trailfinders' online trip portal for clients) after they had left Trailfinders' employment: one defendant on around 30 occasions in relation to 10 clients (claiming to have been granted permission orally from each of his clients), and another defendant on 63 occasions in relation to 32 clients (claiming to have gained permission from 23 of them over the phone).

 

Had the former employees breached any duties to Trailfinders?

 

The judge confirmed that the defendants owed to Trailfinders,

  • firstly, an implied term of confidentiality in their contracts of employment not to use or disclose the Client Information (other than for Trailfinders' benefit) during the course of their employment (as per class 2 confidential information above) and,
  • secondly, an equitable obligation of confidence extending beyond the term of their employment with Trailfinders, but with a narrower scope), in that it did not cover experience or skills acquired during the normal course of their employment with Trailfinders.
  • However, the judge noted that, whilst Trailfinders could not prevent defendants generally from using information held in their minds when they left Trailfinders, this excluded information which was deliberately memorised.

 

Copying such information during the term of employment was in breach of the implied term in the employment contract, and the uploading of that information onto TCL's system and its subsequent use was also in breach of the ex-employee’s equitable obligation of confidence to Trailfinders. The fact that the information could have been available from other sources was irrelevant.

 

Had there occurred any breach by Travel Counsellors?

 

A duty of confidence is imposed on a new employer if it received information it knew, or ought to have known, was fairly and reasonably regarded as confidential. By its business model, TCL expected and encouraged potential consultants (such as Trailfinders' ex-employees) to bring with them details of existing clients to begin building their client portfolio.

 

The judge considered it "highly improbable" that TCL would have believed Trailfinders would not regard its customer lists as confidential, particularly because TCL viewed its own equivalent information as confidential. Further, a reasonable person within TCL's operations would have been aware that at least part of the information brought by the defendants was likely to have been copied – there was too much for them to have memorised it.

 

It was held that TCL ought to have known that it was in receipt of information which Trailfinders reasonably regarded as confidential, and, therefore, the obligation of confidence imposed on TCL had been breached.

 

It did not come up during the case, but it should be noted that any future employer may be liable for breach of confidentiality, inducing such breach, inducing a breach of the (new) employee’s restrictive covenants and other express and implied duties (which can be brought under contract or tort). Of course, there are also considerations as to data protection laws, breaches, and notifications of such, etc..

 

Practical tips for employers:

 

  • All employers should educate their employees about their confidentiality obligations. Express terms regarding the use and treatment of confidential information should be included in their employment contracts. Policies regarding the use of confidential information should also be implemented and regular training provided to all staff about the identification and protection of confidential information to which they might have access within their specific role, e.g., securing confidential information (by locking away physical copies, password-protecting electronic copies, limiting and keeping records of access requests, etc.).

 

  • Whenever employees leave a business, as part of the exit process employers should conduct an audit of what confidential information the employee has had access. Their confidentiality obligations to their former employer should be reiterated to them and employees should be required to confirm in writing (as appropriate) that they have returned all electronic and physical copies of confidential information – to ensure all that is being taken is in the employee's head – and to acknowledge such particular confidential information (including trade secrets) to which they have had access during their employment. Depending on the circumstances of the departure, it may be prudent for access to highly-confidential documents to be monitored and/or blocked to the departing individual, to reduce the risk of any unauthorised copying or printing of such materials.

 

  • If an employee is joining your business from a competitor or otherwise, be cautious if they appear to have more information than they could possibly have remembered (an excess of client information, product pricing, design details, ingredient, or component lists, etc.). If you know, or ought to know, that such information would fairly or reasonably be regarded as confidential, there will be a duty of confidence imposed – even though no contractual relationship exists between you and the former employer. A good indication might be whether you would treat such information as confidential (if it belonged to you), but you should also make enquiries with the employee as to by what means the information came into their possession. Turning a blind eye to the source of the information will not absolve you from liability.

Mushroombiz 2021 Entrepreneur Polling Results

Mushroombiz 2021 Entrepreneur Polling Results

Record number of Generation Z businesses planned this year

 

  • New poll reveals one-in-seven Britons aged 18-24 plan to start their own business in 2021
  • School and university graduates “rejecting job market to take back control of their futures from Covid”
  • Results demonstrate huge recent uptick in “tech start-ups, passion projects and side hustles started in university dorm rooms”

 

 

AS COVID-19 WREAKS havoc on the UK economy, the country’s young people are taking matters into their own hands, a new major poll released today (21 January) reveals.

The poll of over 2000 British adults shows that one-in-seven (15%) young people (aged 18-24) in the UK will start their own business in 2021.

If they carry out their plans, this would result in a record-busting 800,000 new Gen Z businesses this year[1]. Between 2018 and 2019, 390,000 businesses were started in the UK across all age groups.

According to Ed Surman, Managing Director of Mushroombiz, who commissioned the poll, the results show “that young people leaving school and university are rejecting the shrinking job market to take back control of their futures from COVID-19.”

The OBR estimates that the UK enemployment rate will peak at 7.5% in the middle of 2021 – representing about 2.6 million people out of work – up from about 4% before the pandemic struck.

According to Surman this reality has forced many young people to re-evaluate their futures and “become their own boss.” He says the poll backs up what he has seen: “a huge uptick in the number of tech start-ups, passion projects and side hustles started in university dorm rooms in the latter half of 2020.”

As people adjusted to ‘the new normal’ of the pandemic, the number of new companies being created in the UK compared with 2019 soared in the second half of 2020, according to the Office for National Statistics.  July 2020 set a new record with more than 81,000 businesses registered in the UK.

The poll, carried out by Yonder (formerly named Populus) also found that around one-in-five (19%) young people (18-24) considered starting their own business for the first time last year.

The new polling also revealed that 13% of Britons would start their own business if they had more spare time, while 20% would become their own boss if they had more money.

Notably, the poll shows that across all age groups twice as many men (9%) as women (4%) plan to start their own business this year, while over one fifth of Londoners (21%) plan to become their own boss in 2021.

The news comes in spite of underlying concerns for the UK economy, with the poll revealing a majority of Britons (57%) are not confident in the country’s economic prospects for 2021, with 45% not confident in it over the next five years.

The poll was commissioned by Mushroombiz ahead of its annual conference on the future of business in the UK.

Data will be available here soon.

Do I become a sole trader or set up a limited company?

Do I become a sole trader or set up a limited company?

When starting out on your own as an independent consultant, it can feel like a leap into the unknown and from a financial perspective, being independent has many perks but it does necessitate some discipline and responsibility.

Luckily in the UK, becoming a freelancer is fairly straightforward. The UK is reputed as one of the best places to do business and become an entrepreneur. In 2018, the UK was ranked 1st as the best country for doing business in Forbes magazine.

Deciding between self employment and setting up a company.

 

Setting up as a limited company is becoming more and more popular for contractors for a number of reasons, but first it is important to know what the difference is. When you become a sole trader, you are self-employed and the business or “job” you are doing is tied directly to you and you are individually liable for anything that goes wrong! When you deliver your consulting services through a limited company, the business of consulting is the business of a limited company and you own the shares. The benefits of setting up your salesforce freelancer business this way can be found in the ‘limited’ which is shorthand for limited liability. This means you, the director and shareholder, are not personally liable for when things go wrong.If you want to understand how the tax works in both scenarios, get in touch!

"Let's talk about the things that can go wrong!"

Risk Worst Case Scenario as a Sole Trader Worst Case Scenario as a Ltd Company
Dispute with a client over project delivery and you must refund £30,000 You need to pay it out of your own pocket – personal finances at risk. If the company can’t pay it can go bust without you putting your personal finances at risk.
IR35 – A boring but important piece of regulation (esp. for large corporates). Harder for big companies to comply with IR35 because of the defining scope and means of employment rule. Much easier to establish that the freelancer is “defining the scope and means of employment”.
Borrowing More likely to use your house for security. Less likely to use your house for security.
Hiring You can employ people as a sole trader, but again if disputes occur, you’re liable for damages. Liability with the company, means you are not personally liable for damages.

 

We’ve given the sole trader route a bit of bashing. There are benefits going self-employed generally, but given contract sizes for projects will tend to be larger and lower volume than a product business, a limited company might be a better option when starting out. Setting up a limited company might be a little more admin but we believe it is generally worth it from a risk perspective.

Our view on the UK economy

Our view on the UK economy

"As Coronavirus quarantine in the UK continues, we outline what we think the mid-term impact will be, as well as the trading conditions after the restrictions have eased." The biggest threat to global economic stability is what is happening in the US. Bank of America recently released their analysis giving a likely scenario of 10% GDP contraction over 3 quarters with 47 million unemployed workers. At present they do not have anything like the Coronavirus Job Retention Scheme. The UK Office for Budget responsibility predicted a 35% contraction and 2 million unemployed. Considering the US picture this is very good and by having an economy in comparatively better shape with a high percentage of companies surviving means that the UK has an opportunity to gain a little bit of market share at home and abroad. Whether you are competing with an American PR firm or an international competitor in the same foreign market, the government has set up these schemes to make sure you can take advantage of the downturn.

Some of you may have read economics at university but a very simple concept is that there is a perfect, inverse relationship between the unemployment rate and growth. As the economy grows, unemployment goes down, as the economy contracts, unemployment goes up. A 35% contraction is a much bigger drop proportionally than the rising unemployment rate. This means that the Government’s policy decision has been about making sure they keep as many people as possible in employment by keeping as many businesses afloat as possible.

For the UK government these are the numbers that count, because this means more businesses will have some cash (via grants) to take advantage of new opportunities and employees, furloughed or not, will still be able to go out in the summer and spend some money (albeit a bit less).

If you work in retail, take advantage when the lockdown is lifted. People will want to meet up for a coffee, food or a drink to socialise again. We all might have awful hair that needs a proper seeing to by a local hairdresser and some of us will want to hit the gym and maybe get our beach bods ready for what is left of the summer.

Assess your own market, your competitors and look at new markets if that is relevant and achievable.

 

Here’s how some of our clients have been approaching the lockdown...

 

Michael Harley: Redplug

 

UK’s leading Rockwool Approved Blown Insulation Installer

In the current Covid 19 crisis we have tried to take a calm, practical approach. We have looked at guidance from the government information for the construction industry. As a small business we have adjusted our operation accordingly with the government advice to be able to keep our employees safe and keep the business running.

Our customers have been understanding throughout this and hopefully we can continue once the restrictions have been lifted.

 

 

 

 

 

 

John Higginson: Higginson Strategy

Award-winning communications agency

We are a purpose-led consultancy based in London and Manchester. We support a range of companies, charities and public bodies, helping them to explain their purpose, getting them media coverage and opinion pieces in national publications. We also have a podcast that looks beyond the headline called Behind the Story.

Prior to Covid-19 we had two offices so we were already good at working remotely. Once the virus hit we immediately started working from home – luckily we don’t make physical products so this was achievable with minimal disruption.

As a result, the operational challenge we have faced has been not so much on the technical side, but more on keeping people motivated whilst they’re apart. Like many we very quickly became video conferencing masters and have conducted much of our business through this medium.

The other key affect on business is the fear of a recession. Being a consultancy is it (fortunately) easier for people to put our contracts on hold than get rid of us completely. The fact that our clients have been able to furlough non-income-generating staff has also worked in our favour as in some cases it has freed cash for them to continue to engage us. As an outside agency we’re also very productive (we have to be to prove our value compared to in-house resources) which is a useful thing for our clients at the moment.

So after an initial drop-off in clients, we now appear to be winning business. Among those signing up have been a number who are wanting to support the NHS or government in some way, such as through the provision of ventilators or Personal Protective Equipment (PPE). Higginson Strategy has benefitted here due to our access to these channels and our specialism in communicating the right messages about people doing good. Providing they are presented authentically – and not just for commercial gain – these kinds of messages help the bottom line for our clients as people in general want to do business with organisations they believe are doing good.

Overall we have been fortunate that our business model has proven resilient to the pandemic so far and, while we are obviously looking forward to returning to normality along with everyone else, we are pleased to have maximised the opportunities identified along the way. Ross Chaplain: Lykke and Hygge

 

 

Specialist Hair Professionals in Evesham

“Covid-19 was tough for us to begin with. With closing completely, we have had to be really careful to minimise our costs. Having recently taken on a new member of staff this was especially challenging, and, whist we were able to furlough most people, our new-starter was not eligible so we have had to find an alternative way of protecting what income we can for her by paying her a training wage."

We have since received a small business grant, which has eased our cashflow, and we’re waiting for the outcome of our CBILS (Coronavirus Business Interruption Loan Scheme) application which should help us through the next month or so.

When business gets going again we’re confident the demand will be there. We’re preparing to work differently, with PPE and potentially taking on some new assistants to help maintain distancing between each stylist team.

Our staff are really keen to get going again and we’ll be offering them extra working hours where needed to help meet the new demand. All are welcome down for their first post-lockdown haircut!”

R&D Tax Credit Specialists

R&D Tax Credit Specialists

Ed Surman, Director at Mushroom, interviewed Mike Newnham, Quantum R&D Tax Specialists, about Research and Development (R&D) Tax Claims, for Ed’s podcast, Business With The Fun Guys.  The podcast interview is available here to listen to, however we’ve taken the main points of Newnham’s teachings and illustrate them here:

The R&D Tax Credits Scheme is a simple process which rewards companies for being innovative.  It can be an incredible support to business due to the implications on corporation tax.

 

What Is An R&D Tax Claim?

An R&D tax claim is an amendment to the corporation tax return.  It tells the HMRC:

  • you’ve been doing Research and Development
  • what you’ve been doing
  • the costs incurred
  • that you’re entitled to money back under the scheme.

 

How Much Can I Claim?

The R&D Tax Claim looks to enhance your R&D costs by 130%, thereby reducing your profits and allowing you to pay less corporation tax.  For example, if you spent £100K on R&D, this would be enhanced by 130%, equating to a £230K total for R&D.

Note that you don’t have to make a profit in order to claim R&D Tax.  In this situation, you can surrender the claim at 14.5% and get this back.  For example, if your loss is £230K, you can claim this back at 14.5%, as cash to put back into the business.  There are no restrictions on how you can use this cash, and many businesses have used this money to hire new employees, initiate a R&D project, or to buy equipment.

There is also no limit regarding how much can be claimed which makes this scheme more accessible to small businesses who may wish to claim smaller amounts of £1K for example.  There used to be a £10K limit meaning that in order to claim, your costs needed to be £50K plus.

 

Am I Eligible?

Most businesses don’t realise they’re doing Research and Development.  However, the claims aren’t purely for technology companies, it can apply to any type of business.  In order to qualify, you need to be trying to make a technical advance in order to solve a problem, where there’s not an obvious or simple solution.  For example, you could be a cleaning company developing eco friendly cleaning materials or a new app.  Many businesses conduct R&D at some time in their business so it’s worth reviewing the R&D tax credit scheme.

 

How Do I Claim?

You firstly complete your Corporation Tax Form (CT600) then you file an amendment (tax claim).  Both can be done online.  The amendment needs to include two other reports: a financial report containing details of salaries, subcontractors, consumables/materials/prototypes/software and utility costs; and a technical report containing details of the project(s) undertaken, the difficulties you faced, and the process involved.

 

Note that you don’t have to succeed in solving the problem in order to claim.

 

If you would like to know more about the R&D Tax Credit Scheme, please read here https://www.gov.uk/guidance/corporation-tax-research-and-development-tax-relief-for-small-and-medium-sized-enterprises

 

If you’d like to talk to someone about a potential R&D Tax Claim, get in touch with Quantum Tax.  Their contact details are available on their website https://www.quantumtax.co.uk/

 

If you need help with your accounts, completing your corporation tax form or complying with other business obligations, get in touch with Mushroom https://www.mushroombiz.co.uk/

 

Jargon Buster

To simplify the technical terms used in the podcast, we’ve provided an explanation of each below:

  • CT600: form number of the corporation tax return
  • R&D claim: amendment to CT600 (corporation tax return)
  • Tax credit: deduction on tax liability
  • Technical advance: advance in science or technology that doesn’t already exist
  • Financial report: details all costs incurred in doing R&D
  • Technical report: details the technical advances, difficulties you’ve faced and how you’ve overcome them

Setting up shop in Europe?

Setting Up Shop in Europe?

Ed Surman, Director at Mushroom, interviewed Marcus Broix of Trade with Europe for his podcast, Business With The Fun Guys.  The podcast interview is available here to listen to, however we’ve taken the main points of Broix’s teachings and illustrate them here:

Trade with Europe ultimately helps companies trade in the EU.  They’ve been helping businesses for two decades but after Britain’s vote to leave EU, Broix realised many UK companies would need support and solutions to trading in the EU in the future and therefore changed their business model in 2017.

The general election on 12th December saw Conservatives win by a large majority.  Before this there was major uncertainty.  Conservatives offered to complete Brexit, Labour offer ed another referendum, Liberal Democrats offered to cancel Brexit altogether.  So with Conservatives in power and Boris Johnson as Prime Minister, what is likely to happen going forward?  Firstly, Broix says that nothing will change until end 2020 and that changes will happen from 2021.

 

The Deal

Boris Johnson’s deal includes 95% of Theresa May’s deal.  However the 5% change is crucial and is much closer to ‘no deal’ in terms of its effects for UK businesses.  May’s deal stated that the UK needed to stay in the EU Customs Union, Johnson’s deal doesn’t.  This means that if nothing happens by the end of 2020, on 1st January 2021, UK businesses will have to pay full tariffs, and for any exports they need a full customs declaration.  This also applies if a free trade agreement isn’t signed by end of 2020 which looks 99.9% unlikely to happen.  The trade agreement would agree how UK businesses will be able to trade with Europe and the rest of the world.  It affects other countries outside the EU because the EU has 8 free trade agreements with 80 countries which UK will not be part of anymore.

May’s deal included a mandatory need for a level playing field in that, there would be alignment between UK and EU regulations.  Johnson’s deal does not include this, which means social work, medical and agricultural regulations could differ.   Europe will not accept any deal that softens its standards which could make further progress regarding a trade deal by end 2020 difficult.  However, due to current discussions between Johnson and the US regarding salvaging the NHS, is Johnson moving away from the EU and looking for a no deal?

 

What Can UK Businesses Do?

With feelings of uncertainty and lack of control at the moment, what can UK businesses do?  Trade with Europe offers UK businesses the chance to ‘remain’ by establishing a business for them in Europe, similar to a Gmbh or BV company.  Broix suggests that the European business can operate with very little disruption to the UK business.  Trade with Europe helps by hosting the business in terms of administration, tax and operations.  They have an office building in Dusseldorf, which on a par with Munich and Hamburg, that offers virtual, serviced or real offices and meeting rooms.  Once a company statute at the Notaries office is signed and a bank account opened, the German business is up and running.  A network of associates including Chartered Accounts, lawyers etc. are also available to help with accountancy and tax, legal advice and business advice.  Depending on the business model, operators and service personnel to run the German business can also be found.  The Dusseldorf office was primarily set up to support UK businesses offering services however, production is also possible.  UK company Lush chose this option about 15 years ago, years before Britain’s decision to leave.

Trade with Europe have a fulfilment centre in Roermond, Netherlands which is ideal for distribution due to infrastructure and legislation benefits and operational costs.  There is no import tax, tax only applies when the goods are sold plus there are lower delivery and forwarding costs. A UK business can register their company in Roermond which includes all administration, taxation (a Chartered Accountant works in-house) and fulfilment.  If the UK business sells online, platforms are provided from which to sell, orders are taken, packed and distributed worldwide.  As Trade with Europe are a medium sized company, solutions can be tailored to suit individual requirements.  Packaging used is green, biodegradable and plastic is used only in terms of product safety.

 

Whether a UK business is exporting or not, the following is recommended:

  • Prepare your business to be more resilient for economic changes. Check all legal requirements, data protection, IP protection, GDPR and check all contracts with suppliers, to ensure you’re working from a good legal base.
  • Increase your capital base. Review your monthly outgoing costs e.g. rent and make savings where possible.
  • Review your business model and overhaul as necessary. Stop the less profitable/costly sectors that lack future potential and enhance your core business.
  • Grow your market by exporting – online if possible.
  • For those that are already exporting, build a bridge into Europe to access new markets or to stay competitive.

 

Trade with Europe helps you grow your business in a way that you wouldn’t be able to purely from the UK.

Whether you are already exporting or not, Trade with Europe could help.  To find out more, click here.

If you’d like some business support for your UK business, please contact Mushroom by clicking here.

 

 

Mushroom’s call to UK Businesses

[vc_row row_type=”row_full_center_content” bg_color=”#f2f2f2″][vc_column][vc_custom_heading text=”Mushroom’s call to UK businesses: What can you do to help?
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Across the country, caring volunteers are coming to the aid of the isolated and vulnerable members of their local communities, providing them with much needed support and engagement at a time when the consequences of loneliness, a shortage of supplies or an inability to get to a local shop for groceries or medication can be severe.

Local voluntary groups, many under the Covid-19 Mutual Aid UK banner, have gathered small armies of altruistic people with the ability and willingness to help those most in need. We have witnessed first-hand the effort and passion with which people have jumped-to, helping their neighbours with grocery deliveries, medicine runs or just being on the end of the phone to cheer them up with a chat.

It has been a concentrated movement with the power to restore any faith we might have lost in humanity.

[/vc_column_text][vc_tta_pageable][vc_tta_section title=”In Somerset” tab_id=”1585240511285-a7ae9011-7dec”][vc_column_text]Just as one example, a community group in Somerset received a call from a 92 year-old lady who had been without food for 2 days. Thanks to their group, groceries were bought and delivered to her immediately and they are ensuring she is provided with a hot meal every night.[/vc_column_text][/vc_tta_section][vc_tta_section title=”Section 2″ tab_id=”1585240511313-d099d226-848e”][/vc_tta_section][/vc_tta_pageable][vc_single_image image=”1588″ img_size=”full” alignment=”center”][vc_column_text]

We’re doing what we can, but we need your help too.

Since mid-March, Mushroom has committed time and money to help more than 70 Mutual Aid and voluntary organisations across the country setup new phone numbers with their local area code, linked through to a grouping of phone extensions that enable local volunteers to receive multiple inbound calls at once from their communities via an app on their phones, so they can be there to provide much needed support.

Our telephony provider Gradwell has pledged their backing for the initiative by providing the new phone-lines to Mushroom at heavily discounted monthly rates. If you’re part of a voluntary group or know one in need of this support, let them know that they can register here.[/vc_column_text][vc_custom_heading text=”Mushroom is now calling on the UK business community at large to come forward and be counted during this unprecedented time of crisis.
” font_container=”tag:h2|text_align:left|color:%23542466″ use_theme_fonts=”yes”][vc_column_text]Whether by donating time, money or specialist knowledge and skills, we want to hear what your company can do to help.

We’re compiling a directory of businesses and their available offerings to share with voluntary groups UK-wide – to play your part, sign-up here.[/vc_column_text][vc_row_inner][vc_column_inner width=”1/2″][vc_empty_space height=”64px”][vc_cta h2=”Helping you to help others” add_button=”bottom” btn_title=”SIgn Up” btn_color=”success” btn_link=”url:https%3A%2F%2Fwww.mushroombiz.co.uk%2Fbusiness-and-community-support-for-covid-19%2F|title:Contact||” css=”.vc_custom_1585313178705{background-color: #ffc303 !important;}”]Mushroom is also offering dedicated business support for our UK SME clients during the Covid-19 pandemic, including the preparation of individual survival “battle plans”. Find out more here.

Our own business is far from immune from the effects of the current crisis, but with a company group that originated during the 2008 recession, we know from experience that the way we all survive is by coming together and making the very best of our new reality. [/vc_cta][/vc_column_inner][vc_column_inner width=”1/2″][vc_column_text]

What help is needed?

Every business will be able to bring its own value and creativity to this. As food for thought, here are some needs we have been informed of directly by leaders of some of the groups:

– Containers for doorstep deliveries/drop offs, such as cardboard boxes, crates or similar

– Mobile phones/SIM cards for volunteers to use to contact local residents the provision of lanyards for ID badges

– A way of liaising with local supermarkets to agree better arrangements for volunteers to shop on behalf of the elderly and vulnerable (such as access during the first hour of the day and the ability to buy more in bulk)

– Safe methods of transportation to/from hospital

– A simple method of determining which local shops are open/closed

– Antibacterial gels/equivalent to help sterilise deliveries and protect the isolated from infection

[/vc_column_text][/vc_column_inner][/vc_row_inner][vc_row_inner][vc_column_inner][vc_custom_heading text=”Join us and help us make the journey one to be proud of.” font_container=”tag:h3|text_align:center|color:%23542466″ use_theme_fonts=”yes”][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row][vc_column][/vc_column][/vc_row]

4 Ts of Risk Management

4 T's of Risk Management

 

"Risks are the probabilities of bad things happening. In short, the uncertainty surrounding your objectives."

When managing risks, you need to set out Control Statements i.e. what you are going to do to minimise the likelihood of an adverse incident occurring and – if it does – minimising its impact. A clear understanding of your risks and achievable Control Statements is often a major competitive advantage for any company. To do this you need to understand the different types of risk management options you have available.  There are really only 4 types – the 4 Ts.

  • Treatment
  • Transfer
  • Terminate
  • Tolerate

 

This little blog sets out these 4 different types of control statements.

 

Think drugs, think staying healthy. To avoid getting ill you try to stay fit and healthy. 5 Fruit and Vegetables per day, no smoking, low alcohol consumption, regular exercise.

When you’re ill you take drugs like paracetamol and anti-biotics.

We’ve just described different types of treatment, some that are pre-emptive and reduce the likelihood of a threat materialising or reduce its impact before the risk materialises, and some that minimise its impact if or when it does materialise.

For businesses we believe treatment is always a great place to start managing risks. When assessing a risk like a product defect that causes injury, often identifying and addressing training gaps or the need for investing in some new quality assurance tools can knock a hammer blow to the probability of this risk ever happening in the first place. If the risk does occur, having a slick investigation process can do wonders for reducing the negative impact of that product defect in your market. There is often a large number of treatment options available to a company that can cost very little in many cases.

For making your workplace Coronavirus secure and to reduce the likelihood of an infection breaking out, these are some of the many common treatment options:

  • 2m distancing
  • Perspex checkout counters and workstations
  • Personal protective equipment
  • Infrared thermometers
  • A different office rota system
  • Occupational infection control training

 

"Save time and supercharge the return to work with more help from Mushroom"

The clue is in the name. When we transfer risk, we pass on the risk management responsibility, relying on other parties to assist with managing the impact of that risk. Companies have multiple options. A major one is insurance; some are mandatory like Employers Liability, but you may want to take out a Cybersecurity policy. Here, you are transferring the risk of a particular loss from you as the policyholder onto the insurer.

You can also implement risk transfers in your contracts. Run a gym and don’t want to be held responsible if your member gets an injury by dropping a weight on their foot? Limit your liability in your contract.

Are you a construction company that hasn’t built an electricity connection to your new housing development? You could bring in an expert cable installation company. Subcontracting here is a no brainer; if things go wrong, you have another party to claim from if your new homebuyers make a claim against you.

As an overview, Transferring Risks include the following activities:

  • Taking out insurance policies
  • Having good contracts and limiting your liability
  • Subcontracting

Removing the risk. This is often underrated but can often be the most effective when you really go into the detail of a particular risk. This decision can often be made after assessing the costs of treatment (buying protective kit, investing in software and new machinery) or insurance policies and solicitors fees when transferring, and actually the costs don’t outweigh the risk management benefits. In this case, it’s often better to replace or remove a process or procedure to stop that risk from ever occurring in the first place.

Say you’re a lending company and you make manual loan payments to borrowers. The risk is money being lost from the loan drawdown process due to human error.  The cost of training your staff, along with extra fraud prevention software and expensive insurance policies, outweighs the cost of implementing an automated lending system where the payment details are automatically populated by the borrower, thus removing the risk of human error by your staff. This is a form of termination.

Another termination example: an architect being approached to design a shopping centre when they only have expertise in residential homes. The costs of a claim on future insurance policies or fixing errors for free as expected by the angry client may outweigh the short term cost of not taking up the contract! Tolerating Risk is where no action is taken to mitigate or reduce it. This could be because the costs involved in managing the risk are not worth it, or because the probability and impact of a particular risk is so low that it is deemed an acceptable risk for the business.

Caution here:

Even when these risks are tolerated, they should still be monitored because future changes may make them no longer tolerable.

Risk Management is becoming an increasingly important theme for businesses amid the Coronavirus pandemic and getting employees back to the workplace. Different businesses and workplaces carry different risks and risk management is going to get more crucial to any business development decisions your company may take as we deal with changing trade arrangements with the European Union, cyber attacks increase in sophistication and the recession looms.

This is obvious, right?

Well yes, but we believe lots of companies aren’t approaching risk in the right way.

Our view is that SMEs are often sold the dream of good risk management; buying an expensive cyber security insurance policy, or outsourcing certain pieces of work or production to a counterparty, without a detailed understanding of the weaknesses of their models and the threats they face in their markets.

So take your business risks seriously. Make sure you spend time thinking carefully about the risks you face, define your control statements properly and ensure you therefore have a clear plan of how you’ll protect your company and its people, both now and in the future.

You can also check out a free risk management webinar here

For help managing your business risks, take a look at our Risk Management Resource Centre or get in touch.

 

Introducing our Productivity Blog

Macro Productivity/Labour Productivity

Labour Productivity is a measure of output per unit of labour or hours worked. Since the recession, productivity growth has been sluggish.

Macro Productivity or Labour Productivity is only really useful for policy decisions, not businesses decisions. This blog sets out why  productivity is a worry for Government and the Bank of England and why policy tools won’t fundamentally solve the problem. There needs to be a culture shift in the way SMEs operate their businesses because we think improving productivity can only be done at a micro-level and not a policy level.

Labour productivity is really important for policymakers because it indicates how fast the economy can grow before it starts to push inflation up. Bank of England economists call this “slack” and the measure of this stuff influences  the Bank’s decision on interest rates.

If you are into homemade lemonade, a good analogy of slack or productivity is how much juice you can squeeze out of each lemon before you increase the number of lemons.

The Data

As you can see from the chart below, labour productivity has not followed the pre-crisis trend:

Output per hour (UK), 2000-2015. Source: Bank of England

This is the UK’s biggest headache. This is one of the main reasons why interest rates have remained so low and are unlikely to change before the end of the decade.

Some reasons have been put forward by the Bank of England in their piece on the productivity puzzle.  One reason is that many businesses kept their workers in 2008 to side-step any cost of rehiring when the economy picked up and the new jobs that have been created are in low skilled and low productivity areas of work.

For Mushroom, there are two stand out reasons for the UK’s current productivity problems:

  • Unproductive companies are facing little pressure because interest rates are so low, so the cost of overdrafts and loans have kept weak companies afloat.
  • Businesses were spending less money on investing in new skills and technologies (but this is changing).

 

Poor productivity is systemic.

SMEs account for 99.9% of all private sector businesses in the UK. Totaling £1.8 trillion last year, SMEs’ combined turnover was 47% of all private sector income in the UK economy yet 60% of all private sector employees were employed by SMEs.

That means that companies over £40m turnover employ roughly 40% of private sector employees and contribute 53% of private sector income.

So, poor productivity can be summarized as the following:

99.9% of all UK companies and 60% of the country’s private sector employees produce less than half of private sector income.

0.01% of all UK companies and 40% of the country’s private sector employees produce more than half of private sector income.

There are many small businesses out there, that are making a profit, but day-to-day operational cash-flows are often a daily pain. Taking growth to the next stage always seems difficult.

How do Large companies scale?

At some point, large companies got their scaling right. After starting up, running your business in preparation of this scaling is the hardest phase.

This is a problem for ambitious businesses and a problem for the Bank of England too.

Those companies that scale, generate 69% extra in income per person, per year. If more companies fall into this bracket, wages increase and living standards rise. This pushes up inflation and interest rates, creating a more stable (in price terms) economy.

We think, as accountants, SMEs should always think less about tax and more about operations. Throughout this blog series, we will go through some of the great tools and calculations you use. We are here to up-skill your management and resource planning. But for now, these are some key questions to ask yourself as an established or newly started business:

Is my spend on marketing justified for my operations?

Can I scale up my operations effectively to cope with higher demand?

How much net profit do I make per unit of goods or services?

Where/What/How/When/Why do I invest capital to improve the answers to the first three questions?

 

 

In our next blog we will look at measuring output and the four key areas we believe drive up productivity.