What Is GDPR, And Are You Ready For It?
Are you GDPR ready? (Image via Shutterstock)

As of 25th May 2018, your business will have to be fully compliant with new regulation relating to how you manage and store data. This new tranche of regulation is known as GDPR (General Data Protection Regulation) and is an expansion of existing data protection laws, known in the UK as the Data Protection Act 1998.

Why is this new regulation coming into force? The initiative came from the European Union (EU), which was concerned about the use by (and security of data in) businesses, exactly what data businesses and organisations held on individuals, and whether they had the consent of those individuals to hold data about them. These concerns were brought into the public eye by the rapid transformation of society by citizens’ use of new technology and digital platforms, such as the adoption of social media and e-mail.

The first thing to note is that Britain leaving the EU as a result of the ‘Brexit’ vote will have no impact on the adoption of the new regulation; as mentioned, the regulation comes into effect in May of 2018, and businesses must be fully aware of their obligations under this new legislation.

So what exactly will businesses need to be aware of and need to implement in advance of 25th May 2018? Full information about the regulation and some preliminary guidance is available online from the Information Commissioner’s Office (ICO), but I will summarise the headline issues and actions in the rest of this article.

The good news is that GDPR provides your business or organisation with opportunities to revisit business processes in a way that will yield efficiencies and engage with past contacts and clients. The bad news is that businesses and organisations are up against it if they have yet to consider the implications of GDPR for their work, and they must start to do so now if they are to be ready in time. GDPR is mandatory legislation, and does not provide businesses or organisations the opportunity to opt out. Failure to comply with GDPR, especially in conjunction with a data breach, could result in sizeable fines. In addition, it is businesses and organisations themselves that are held legally accountable (not their employees), so you need to ensure that everyone on the payroll understands the significance of GDPR and their professional obligations under it.

In a broad overview, GDPR can be summarised as having two core themes; the security of data held by an company and organisation, and the rights or permissions of that company and organisation to hold that data. Each is equally as important as the other as far as the legislation is concerned.

In terms of data security, GDPR is primarily concerned with how information on individuals is both stored and accessed, and whether a person who is viewing that information has the individual’s permission and good reason to do so. Given that most information is stored digitally, the prime concern for businesses and organisations will be how information is kept or accessed on digital devices such as laptops, computers and phones, but this also extends to data storage solutions such as USB sticks, CD-ROMs and internet servers. However, GDPR also covers traditional hardcopy records and how they should be kept under lock and key when not being accessed.

The main focus of these security concerns is minimising the risk of data breaches; data incorrectly or illegally accessed or obtained by others due to a business’s or organisation’s carelessness or non-compliant processes. Given that identify fraud can be easily committed with the bare bones of information about any one individual, the legislation is to ensure that the risk to citizens is minimised when they provide their personal details to others for legitimate purposes.

The second, most equally important aspect of GDPR is the justification for a business or organisation to retain information of individuals in the first place. In other words, does that business or organisation have the consent and knowledge of that individual to hold onto information about them, and is the information that they do hold relevant to the organisation and only used in an appropriate manner?

This in turn means that businesses and organisations must audit the information that they currently have on file to ensure that it meets the criteria, and must dispose of information that is no longer valid or justifiable. In addition, it must also look at how it gathers information, how that information is stored and how that information is accessed, specifically in terms of the individuals’ own awareness of how the business or organisation intends to hold, process and store their data.

To tie these two strands together, businesses and organisations must nominate internal stakeholders with regard to data protection, and let the Information Commissioner’s Office know of this point of contact.

As you can gather, GDPR is a huge subject with significant ramifications, but it does provide a spur for businesses to get their houses in order, with eventual profitable outcomes in addition to the required compliance.

The good news is that there is still time to get your business compliant for GDPR. Also, If you’re already following existing data protection legislation, you’re probably in a position to make the few remaining transitionary steps. Diamond Discovery can help you with this and provide software solutions to help you maintain compliance, so do get in touch with me if you want to know more.

For more information on technology that help with your accountancy services, please visit www.preludeaccounts.com, call 01656 725800 or e-mail info@preludeaccounts.com.

Prelude Accounts can also be found on Twitter via @PreludeAccounts / https://twitter.com/preludeaccounts.

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A common complaint from people is that they receive dubious looking e-mails from seemingly themselves; how can this be possible, and why is it happening?

The quick answer is that the sender of an e-mail can call themselves whatever they want to, and the name in your inbox does not necessarily correspond with the actual e-mail address from which it is sent.


Have YOU ever received an an e-mail from yourself? (Image via Fotolia)

For example, my e-mail address is ian@diamond-discovery.com. Only I can send e-mails from this address. However, when people I e-mail receive e-mails from myself, the name that appears in their inbox is ‘Ian Vickers’. Why is this? This is because you can edit the covering name of your e-mail address to whatever you want it to be and it does not have to be at all related to the underlying e-mail address.

In other words, I could quite easily call myself ‘Joe Bloggs’ and send an e-mail from ian@diamond-discovery.com without any issues. The words ‘Ian’, ‘Vickers’ or ‘Diamond Discovery’ do not have to appear in the covering name associated with an e-mail.

Why is this? Simply put, companies that manage people’s e-mails realise that people’s name and titles change as they go through life, whether it via marriage or professional qualification, and that they require the ability for their name to appear as they choose. In addition, many people who have common names often have to end up with e-mail addresses that can be quite different to their actual names. Also there may be a need to differentiate between two employees with the same name who happen to work within the same organisation.

Given all of this, why are you receiving e-mails from yourself that you seemingly never sent? The answer is simple; spammers have appropriated your name or your e-mail address title (not your actual e-mail address) and have used it to cover the e-mail address from which they actually sending from. It is a rouse, and there is nothing technically you can do to stop people doing this.

A good analogy is postal mail. You can write whatever return address on the back on an envelope; it doesn’t necessarily mean that you wrote that particular letter at that address or that you sent the letter from that address. It also doesn’t necessarily mean you live or use that address either.

So what can you do? First of all, ask yourself the obvious question “Did you send this e-mail?” Chances are you probably did not. If you want reassurance that your e-mail address has not been hacked, the best way you can check is to look in your ‘Sent’ e-mail folder. Does the e-mail you have received from yourself appear at the date and time it appears to have been sent to your inbox? If not, your e-mail has not been hacked.

The second thing to note is that you should not open the e-mail. The reason the spammer has appropriated your name is so that you will open the message out of curiosity. Either the message will be a money making scam or something more malicious, such as a message containing ‘malware’ (software that can infect your computer). There is no need to open it and if you really have to, there are safer ways of doing so.

Thirdly, select the e-mail without opening it and block the sender. If you hover your mouse cursor over the e-mail name of the sender, you should see the underlying address from which the e-mail is sent – invariably this does not correspond with the e-mail address ‘on the surface’. You will then be blocking this underlying e-mail address and not yourself, and you will no longer get messages from this particular spammer.

Unfortunately, this appears to be a common tactic amongst spammers so chances are you will receive mysterious e-mails from yourself again in the future but from other senders. The best way to deal with this is to repeat the three steps outlined above again and when necessary.

The key thing to do is not panic; this is a common scam and it does not necessarily mean that your e-mail address has been hacked or that your details are particularly vulnerable. However, if having gone through the process above, and if you are still convinced something more malign is going on, get in touch with your e-mail provider who can double-check this on your behalf.


To find out more about e-mail hosting and Diamond Discovery’s e-mail hosting services, call 01656 725800 or e-mail info@preludeaccounts.com today.          

There are many software tools in the modern accountants’ armoury that were not available to the previous generation, such as e-mail and Cloud accounting.  One that has proven essential for modern, successful businesses is an efficient Customer Relationship Management (CRM) system.

(Some rights reserved by Viktor Hanacek)
(Some rights reserved by Viktor Hanacek)

CRM is exactly what it says; a process or methodology to manage relationships with existing and prospective customers.  It isn’t software driven and fundamentally it doesn’t require software more advanced than to record interactions with customers and remember key dates; a basic spreadsheet and email client could do the job.

As with many things, however, modern software has simplified and semi-automated processes that could otherwise be both time-consuming and cumbersome.  Many businesses have a computerised, centralised record-keeping system that all business users can access and update as and when they interact with a particular client.

An effective CRM system is virtually essential if your business has a sales force or a customer services team that operates remotely from the central office or each other.  One arm of the business needs to know what the other arm is doing or has done, not only to maintain internal processes but to maintain interactions with new and existing customers.

Traditionally, CRM is seen primarily as a marketing tool, acting as a central hub for mailing lists.  Computerised CRM is particularly good for this activity as it enables you to segment your contacts lists across a variety of classifications of your own choosing, ensuring that the right marketing messages get to their relevant recipients.  It also enables you to personalise the greetings and other information within a marketing message, which is now the expected norm from the recipient of any business communication.

However, reducing CRM to just a marketing or sales tool is short-sighted.  It can and should be integrated into other business systems and processes such as invoicing (easily done with modern cloud accounting software) and business alerts.  It can also be used to drive business intelligence reports, for example analysis of clients by size, business type, fee income or calculating the cost of customer service support by client (the number of interactions your business has with a client – and the business cost of those interactions – against the actual return you receive from them).

For the modern accountant, CRM can be a time-saving device that not only helps your business but can also help your clients’ businesses, for example by ensuring that you contact clients at appropriate junctures throughout their business year according to each client’s records, and it can also help semi-automate communications with your clients in a manner that is not too impersonal or broad for them.

Any form of intelligent, sensible automation will bring cost savings, and computerised CRM is a prime example of this.  As I have often highlighted in these columns, the speed of technological advance is making new technologies easier to use and more accessible, not least in terms of mobility and remote access though apps on mobile devices such as smartphones and tablets.

All of this aside, there is another key reason why a business should make the effort to maintain a CRM system and that is data protection.  Under both the Data Protection and Freedom of Information Acts, all businesses and organisations have a legal duty to protect people’s information that they hold in a secure manner and, in certain circumstances, to make that information available upon request.  A robust CRM system will help to meet these obligations while also bringing the other benefits that I have already described.

If you do not yet have a form of CRM system for your business, start thinking about it now.  Not only will it bring efficiencies and help to ease business stresses, it will also give you peace of mind when it comes to managing and protecting your clients’ data.

For more information on technology that help with your accountancy services, please visit www.preludeaccounts.com, call 01656 725800 or e-mail info@preludeaccounts.com.

Prelude Accounts can also be found on Twitter via @PreludeAccounts.

© Tomasz Zajda - Fotolia.com
© Tomasz Zajda – Fotolia.com

These days, it seems that a week does not pass without some well-publicised hack or leak on the internet featuring in the news. From celebrities’ private nude photos to film scripts, from private messages to even complete films themselves, everything stored on the internet seems to be vulnerable to being copied or stolen. But is Cloud Computing really as unreliable and untrustworthy as all the headlines suggest?

What is Cloud Computing?

Cloud Computing is a useful function for all those who create, manage or want to share electronic documentation or content. Traditionally, computing was predicated on the power and the capacity of a user’s own computer, which was used to store and run computer programs as well as the output of those computer programs, whether they be word processed documents, spreadsheets, videos or audio. However, over the last 5 years or so, the way people compute has been radically changed via the internet and the popularity of mobile or portable devices.

The idea that someone would have just one device from which they would run programs or access the internet (for either personal or professional reasons) is antiquated. People now have very powerful computers on their person in the form of mobile phones or tablets, which are just as likely to be used for computing as the desktop or laptop that is based back in their office. The way people need to access or create information has changed, and computing has changed to adapt to these new needs.

Cloud Computing is the solution to a person’s modern computing needs. Rather than storing information on one device, or having to install and run a computer program on a particular computer, people access information and software that is stored and run remotely on the internet itself. This liberates people to work from a variety of locations and also to work on a variety of devices. Cloud computing has also opened up new avenues of collaborative working (two or more people can work on the same document at the same time, for example) and has speeded up file sharing with colleagues through services such as Dropbox or Google Drive.

Cloud Computing is a powerful, arguably essential, feature of the modern workplace that has speeded up processes and liberated work practices. It is therefore inevitable that the more widespread a new technology is adopted, the more likely its flaws are going to be highlighted or publicised and potentially exploited. But just how much at fault is Cloud Computing itself, given the recent scandals? 

Nothing is 100% secure or impenetrable

Any security system, by being a human creation, will have fallibilities and weaknesses. There is also a trade-off between ease of use and access on the one hand and the security and privacy offered by such systems on the other. In theory, most computer programs could offer an indefinite series of passwords or security features, but too many would make such computer programs unusable and highly frustrating for day-to-day use. It is this trade-off that encourages users to take shortcuts or to disable security measures with Cloud Computing, and it is this that puts people’s data at risk, not the concept of Cloud Computing itself. 

The majority of Cloud Computing scandals are due to criminal activity, user naivety or user carelessness

It is the way that most users approach Cloud Computing that can create vulnerabilities, rather than Cloud Computing being inherently vulnerable in itself. By creating a daisy chain of computer programs that access the same information from the same online Cloud source, a user is potentially creating many additional points of vulnerability, which would not exist if they were using just the one dedicated Cloud Computing program for one particular purpose.

A recent case in point is the well-publicised revelation that Snapchat messages had been stored somewhere else and have now been leaked online for all to see. Snapchat is a messaging application that offered the promise of privacy; unlike an e-mail or normal text message, any text, photo or video sent to a recipient would automatically be deleted after having been read, in a manner not too dissimilar to the mission briefings in “Mission: Impossible”. Obviously, the news that Snapchat messages were not being deleted and were being stored is both potentially disastrous for both the user and for Snapchat. However, it has since been revealed that Snapchat is not to blame; the security breach only affected those Snapchat users who had installed and used another third-party application that interacted with the Snapchat app. In other words, if users had not attempted to tinker or customise Snapchat itself, their messages would still have been safe and secure.

This highlights that the main risk of Cloud Computing is the naivety of users as to how it works and how it should be configured. If you are looking to safely store your information, be aware of how your information is being stored in the first place, where it is being stored and how it can be accessed. For example, the recent cause célèbre of nude celebrity photographs being leaked on the internet occurred because many of the celebrities involved were simply unaware that the photos that they took with their internet-connected mobile devices were automatically backed up to their iCloud accounts. This is unfortunate naivety about a feature that is there to benefit users of the Cloud; if your mobile device were stolen, you would still have your photos backed up on a remote account.

But in the case of the celebrity nude photos, naivety is only half the answer. In many instances, their accounts were hacked by dedicated fans and disgruntled former employees, who either figured out the celebrities’ passwords (i.e. trawling interviews for the names of pets, for example) or were privy to the account details in the first place. Although the celebrities were both naïve and a bit careless about their security details (people should change their passwords on a regular basis), they were ultimately the victim of criminal activity. People logged on to those celebrities’ Cloud accounts without permission and with malicious intent, and people should not lose sight of that fact. 

So the Cloud is not secure then?

Not so; the Cloud is secure or as insecure as your own understanding and your interactions with it make it. In all the examples above, there was a perfect storm of user naivety, user carelessness and malicious intent. By tackling any one of those three issues, you make your own Cloud Computing experience immediately more secure. You can’t remove the threat of malicious intent in others, but you can certainly make sure that you fully understand your Cloud provision, which programs have access to it and how they access it. By doing so, you make Cloud computing as safe as any other form of storage.

Even the most secure banks, vaults and museums get burgled occasionally, and it is unrealistic to expect Cloud Computing to be 100% infallible. However, by having a full understanding of how you use it and what security you can put in place, you will ensure that the risk of a breach of your Cloud storage is not inadvertently increased by your error or your own misunderstanding of the technology.

What Is Pension Auto-EnrollmentA new law now in place means that soon every UK employer must provide a workplace pension scheme into which their employees will be automatically enrolled.

Employees can opt out if they wish, but all employers will be legally required to have a suitable pension scheme in place and to offer it to their employees.

EMPLOYERS CANNOT OPT OUT.  This applies to all UK employers, even if you have only one employee and that is yourself.  Auto-enrolment is mandatory and the government will impose punitive penalties on employers that fail to comply with the legislation.

Hopefully these opening lines have grabbed your attention sufficiently for you to read the remainder of this article in which we explore some of the details and consequences of this legislation.

Pension Auto-enrolment has come about due to concerns about the affordability of the state pension in the future, concerns about people’s savings for old age and public trust issues with regard to the pensions industry.

Every employer must have a pension into which employees can be automatically enrolled and that satisfies the ‘qualifying scheme’ criteria.  This is known as Pension Automatic Enrolment or Pension Auto-enrolment.

Employees that are eligible for this scheme are those who:

  • are aged between 22 and State Pension Age
  • earn more than £9,440 per year (2013/14 limit, this amount will change)
  • work in the UK

The concept of auto-enrolment may sound straightforward enough, but there are complexities that must be addressed by employer and employee alike.  Larger businesses have been moving across to pension auto-enrolment schemes since 1 April 2012 but most small businesses are expected to provide it to their employees that meet the criteria during the 2014/15 and 2015/16 financial years.

The scheme is designed to ease employers and employees into the concept.  At first, a minimum of two per cent (2%) of qualifying earnings must be contributed, of which a minimum of one per cent (1%) must come from the employer. That rises over time to eight per cent (8%) by 2018, of which the employer must contribute a minimum of three per cent (3%).

Businesses therefore need to put in place the structures, processes and accounting/payroll software that can help manage the pension auto-enrolment process in an effective and compliant manner, while employees must make themselves aware of the pension options available to them along with any risk or consequence of not agreeing to the auto-enrolment process.

As an Employer, what should I do?

  • Contact The Pensions Regulator (TPR) to confirm when your business will be expected to join the pension auto-enrolment scheme.  This is known as your staging date.
  • Appoint a person within your organisation who will be the designated contact with TPR.
  • Contact your payroll provider and find out how they will deal with pension auto-enrolment of your business.  Key questions to ask include:
    • What are you doing for auto-enrolment?
    • What additional support will you provide?
    • When will any necessary amendments to the accounting/payroll software be ready?
  • Ensure that you are offering your employees a qualifying pension scheme. Employers must have joined a qualifying pension scheme in advance of auto-enrolment of their employees. Employers who are not suitably set up by the target date set by TPR could be fined.
  • Auto-enrolment requires someone to take responsibility for the scheme within a business, so as to oversee the process.  Formally appoint that person.
  • Develop an auto-enrolment introduction process. Make sure that every necessary step of introducing auto-enrolment will be followed in the correct order, and that qualifying employees are communicated with at the right junctures and with the correct, complete information.
  • Know the cost to both yourself and your employee. The amount of money to be paid by a worker, and their employer, will be calculated as a percentage of their “qualifying earnings” or, in other terms, gross earnings of more than £5,715 and up to a maximum of £38,185. For example, for a person who earns £19,000 a year, the percentages would be calculated on the difference between £5,715 and £19,000, which is £13,285.

What happens if Employers get Pension Auto-Enrolment wrong?

Employers will have the responsibility for ensuring that they have a compliant scheme in place and making sure the correct employee and employer contributions are made every pay period.

If an employer has been found to be running a scheme that is non-compliant, then they face the risk of daily penalties from £50 per day for small employers (less than 5 employees), to £10,000 per day for large employers (more than 500 employees) until compliance it met.

As an Employee, what do I need to know?

  • Ask your employer when they will be introducing the Pension Auto-Enrolment scheme.
  • Find out which pension scheme your employer will be offering.
  • Talk to a financial advisor about your pension options, especially if you are already part of a pension scheme or multiple schemes.
  • Decide if you want to opt out of your employer’s auto-enrolment scheme.  You will have to do this every three years of employment or when you join a new employer if you want to remain outside of the scheme.
  • If you decide to join your employer’s scheme, make sure that you complete all the necessary paperwork correctly and that you notify your financial advisor and accountant.

Where can I get more information about Pension Auto-Enrolment?

For more information about Pension Auto Enrolment, visit The Pension Regulator website:http://www.thepensionsregulator.gov.uk/

If you are an employer and you haven’t already done this, we recommend that you start the process very soon.

What Is Pension Auto-EnrollmentIt’s tempting, isn’t it? You’ve had a rubbish day at work, you don’t get on with your boss, you feel underpaid and you don’t spend enough time with your family. The obvious temptation is to strike out on your own and start your own business.

Although there are many benefits of being your own boss and running your own business, it is not a decision to be taken lightly and there are many considerations you should take into account before taking the plunge.

Here are 15 questions that you should ask yourself before announcing to the world that you will soon be working for yourself.

  1. Is there a viable market for your business?
    Although you may be highly skilled and competent in your own field, you have to assess whether there is a viable market for your skills as a sole trader or as a small company.
    How many other people out there are already offering services or products to those that you intend to sell, and how many are already selling into the geographical area that you planning to operate in?
    Just because others are already doing something that is similar to what you intend to do should not deter you from setting up on your own (far from it; it shows that there is a demand for such services or products), but it will impact on how you will present your new business to the outside world. In short, what are you going to offer that others don’t? What is it that is going to make people choose you over your would-be competitors? Many in business will refer to this as your USP; your Unique Selling Point.
    Underpinning your assessment of whether your intended business is viable would be a detailed and comprehensive business plan. This would cover all aspects of your business, whether that be projected outgoings and income or the various structures and processes that will need to be put in place.
    Without a business plan, you will find it difficult to convince others of its viability, which is crucial if you are looking for external help to get going. Many of the following questions will need to be addressed within a business plan.
  2. Where will you be positioning yourself within your market?
    Unless you have come up with a particularly innovative or unique product or service, the chances are that there will already be people offering similar things for sale in your intended marketplace.
    As we have already touched on, you will need to decide what you are going to do to differentiate yourself from your competition. However, you will also need to decide where you are going to be placed within an established market. Are your products or services going to be expensive, high quality, luxurious and ‘high end’? Or are your products or services going to be ‘cost-effective’ (cheap!), not particularly complicated or advanced, and ‘low end’? The answer to this conundrum is key, as it will determine your running costs, your customers’ expectations and, ultimately, your profitability. It will also determine how you will market yourself at the point of launch.
    If you do not know how you’re going to position yourself within your intended market, there is a high chance that your new business will fail, for you have not identified where you fit in and what customers will come to expect from you.
  3. Are you going to work as a Sole Trader or as a Limited Company?
    There are many different pros and cons for being set up as a Sole Trader or a Limited Company, which we will cover in more detail in a future blog. Broadly, the main differences are as follows:
    trading as a limited company can be more tax efficient but it requires more administration.
    trading as a sole trader requires less administration but can be less tax efficient.
  4. Will you need to employ others or sub-contract work out to operate your company?
    Whether you plan to be a sole trader or a limited company, the chances are that you will need others to help you run your business. This might be sub-contracting out your marketing orbookkeeping, or directly employing someone to help you with the day-to-day running of the business.
    Sub-contracting work out or hiring someone will incur additional costs (overheads) for running your business, and these should be factored into your start-up and running costs. Also, if you are employing someone, employment legislation will apply to you and you will be expected to pay additional tax (such as National Insurance contributions) as an employer.
  5. What will be your start-up costs?
    To get going in business, you will probably have to pay out on quite a few different expenses well before you start having money coming in.
    Figure out, realistically and honestly, what your start-up costs are likely to be, and then you can prepare yourself financially for starting out on your own. In addition, there are many funds (both public and private) out there which you may be eligible to access that can help you meet the costs of setting up a new business.
  6. What will be your ongoing operational costs?
    Many make the mistake in thinking that most of their outgoings will be tied up in getting the business up and running but, while this can be expensive and fairly comprehensive, there are still likely to be substantial ongoing costs that will need to be covered on a monthly or annual basis.
    When putting together your business plan, you must include the likely ongoing costs as this will affect the forecast of your profitability.
  7. Can you start up and run your business alongside your current employment?
    Wanting to start up on your own doesn’t necessarily mean that you have to storm out of your current job to do so.
    Depending on what precisely you are planning to offer, it might be feasible for you to run your new business alongside your existing professional commitments.
    Obviously this is a step that will need to be discussed with your current employers, who are likely to be concerned about any professional conflict of interest (are you going to end up working indirectly for their competitors? Is your new business going to take away from their own business?) and also whether you taking on a new business could affect your performance at work (Are you going to be too tired to do your existing job effectively? Will your running another business affect your availability?).
    If your new business is small scale and not trading in the same sector as your current employers, the chances are that they will not object to you setting up a new venture. Be mindful, however, that this could be interpreted as a lack of commitment to your current employer and could jeopardise your promotional chances within the organisation. However, your new business may prove such a success that it may turn out that it is you who will be giving your employers notice in due course.
  8. Have you made financial allowances to protect your lifestyle while your business is getting started?
    Setting up a new business can be an expensive process, so make sure you have sufficient financial reserves so that by doing so you are not jeopardising your current lifestyle and that you can meet all your existing financial commitments.
    Before setting up, you should look to save money in a dedicated fund to support your business and your lifestyle and you should also consider getting initial finance from others sources.
    You may also want to look at cutting back on your current outgoings before going solo, and there are many blogs and books (such as Tim Ferriss’ 4 Hour Working Week) that offer some good advice on how you can lower your financial overheads without compromising your standard of living.
  9. Have you talked to an accountant about your new business?
    As you can already see, the biggest questions you face about setting up a new business are financial and legal. You are therefore probably best of talking to a qualified accountant who can advise you on the best options for your business before setting up.
    Not only will an accountant ensure that you are legally compliant when it comes to tax and your accounts, they can also offer advice on how your business should be constituted (i.e. whether you should be a sole trader or a limited company) and what funds are available to help new businesses.
  10. Have you investigated government or other support for your new business?
    Government and the private sector recognise the importance of new businesses for a growing economy and, as a result, there is plenty of advice and some financial support available to those who are looking to set one up.
    Here in Wales, Business Wales will offer new business owners advice on how to get going. In Bridgend (where Prelude Accounts is based), Business in Focus offers advice and premises to those who are starting out.
  11. How will you handle the branding and marketing of your new business?
    Just because you may know a lot about the product or service that you intended to offer, it doesn’t necessarily follow that you will know all about all the other skills that you will need to successfully set up and run a business.
    Just as it is advisable to seek out an accountant for financial guidance, it is also probably wise totalk to a professional marketer or marketing agency about how to go about your initial branding and marketing.
    Branding is crucial for a business for helps attract customers and set their expectations for the business, while ongoing effective marketing is needed to maintain awareness of your business and its services.
  12. Who will manage your day-to-day accounts and paperwork for your business?
    On a similar note, you may have only given consideration about how you supply your services or the manufacture of your products without fully grasping the need to fulfill all the other essential functions needed to keep a business going.
    – Who is going to maintain your accounting books and records?
    – Who is going to chase up late payments from customers?
    – Who is going to sell or market your new business to potential customers?
    It is easy for new business owners to say that they’ll do this is in their spare time, but this can often be to the detriment of both the new business owner and the business itself.
    Give serious consideration as to all the necessary functions that must be fulfilled for the business to operate efficiently and legally, and ensure that you have allocated sufficient resources (whether it be financial or human) to meet those needs from the outset.
  13. What insurance cover will you need for your new business?
    Whatever your business, you will need some form of insurance to cover your business and its assets. At the very minimum, you will need some form of Public Liability Insurance to cover your staff when they are working outside your office premises and some kind of Professional Indemnity Insurance is also advisable if you are a service provider for other businesses.
    A qualified business adviser or an appropriate government agency will be best placed to advise you as to what you will need in this regard.
  14. Will you need new premises for your new business or can you work from home?
    A new business needs to be based somewhere, even if you are intending your business to be mobile in nature. Give serious thought as to whether you want your home address publicly identified as the business address, as you may not want customers coming to your home and it may also act as a negative in the perception of your business as well. In this instance, you may want to rent a PO Box.
    If you need office space, you may want to work from home but be mindful of possible Capital Gains Tax implications if you have dedicated a part of your house for business purposes. If you intend to employ anyone else who may work from your home, you may also want to seek guidance on whether any health and safety regulations may apply to that space as well.
    Alternatively, you may want to rent small premises from which to run your business or you may want to explore ‘hot-desking’ models that are proving to be increasingly popular. Here in South Wales, the Indycube network is a popular example of hot-desking although there are also other networks available.
  15. Have you considered the impact of running a new business could have on your personal life and your finances?
    The final question you should honestly ask of yourself is whether you are prepared in your personal life to run a new business.
    Although in the longer term you should find more liberty in how you manage your own time in comparison to working for someone else, in the short to medium term, a new business will require a lot of your own time and attention to get it established and to make it a success.
    This will involve working in your ‘spare time’ (evenings and weekends), and you have to be prepared to put in long hours and to be readily available to all potential new customers. In other words, you will effectively be ‘on call’ 24 hours a day, seven days a week for as long as it takes to establish your business, and others in your personal life have to understand and accept that this new lifestyle is necessary if your business is to be a success.
    Make sure that partners, family and friends are understanding of your new professional lifestyle choice and what it will entail, and be prepared to make tough judgement calls when it comes to competing demands from your business and your own home life.

What Does Tax Return Deadline MeanIf you run a business or are a sole trader in the UK, the end of January always runs the risk of being a stressful time.

31st January is the self-assessment deadline for tax returns for the previous financial year, which often triggers a panic among those who are trying to get their financial affairs in order. However, with some planning and preparation, the process can be stress free and your tax return can be completed and filed in good time well before the deadline.

A financial year is a defined period of time for calculating annual financial accounts for businesses, organisations and individuals.

Different countries will have different regulatory accounting and taxation laws that require the submission of reports (based on the financial year) typically once every twelve months. The financial year in question does not have to reflect the actual calendar year (1st January to 31st December) so financial years vary from business to business, country to country.

However, there are normally clear deadlines in each country by which companies and some individuals have to submit their accounts and tax returns for a particular period in which their financial year falls. The tax return filing deadline is NOT the end of the financial year, and the two are often mistakenly confused with each other by those not familiar with accounts.

In Britain, the Personal Tax Year runs from 6th April in one year to 5th April in the following year. The reason why the British Personal Tax Year starts in April, and not January, is due to the historic change in calendar systems used in Britain in the 18th Century. People affected by the British Personal Tax Year are usually sole traders and individuals with one or more different sources of substantial income.

For tax returns, businesses and individuals usually do not need to submit their tax returns for one financial year until later into the following financial year, thereby giving finance directors, accountants and individuals time to fully prepare the accounts to be submitted and reviewed. So, in the UK, for the 2012-13 tax year (ending on 5 April 2013), the deadline for paper returns to HMRC is midnight on 31st October 2013 while the deadline for returns submitted online (i.e. via the internet) would be 31st January 2014.

By preparing tax returns for a financial year, an individual or their accountant can calculate the tax they owe the Government on their income. An accountant can also see whether their client qualifies for any tax deductions based on tax legislation, which supports businesses based on their assets and their expenditure.

So given this, what can you do to ensure that you are in control of your own financial year, whether as a business or individual? Here are 6 tips that will help you get all in order.

1. Contact HMRC

If you are in any doubt about what exactly your tax status is as an individual, consult with HMRC. If you only have one significant regular income from one or two employers, the chances are that you will not have to submit a personal tax return, as your tax will have already been deducted from your salary by your employer(s) and given to the HMRC.

However, if you have received significant incomes from other sources aside from your main salary (including some benefits), you may have to submit a personal tax return. Also, if you are self-employed, you will be expected to submit a personal tax return as well.

HMRC’s telephone helpline for self-assessment is 0300 200 3310, and that should be the first call you make when you start assessing your tax obligation.

All businesses (however they are constituted) are legally obliged to pay tax on their income.

2. If in doubt, consult with an accountant

Tax and accounts can be a complex business and if you are not particularly good with numbers and arithmetic and are unfamiliar with tax law, you are best off consulting with a qualified accountant.

An accountant is not just there to bring you the bad news of how much tax you may actually owe; they can also highlight legal, legitimate savings and entitlements that you may be eligible for. They will clarify, if HMRC has not already done so for you, what is and what isn’t taxable income.

An accountant is not a professional whose job is to get you out of paying tax (if you are making money, you will owe tax), but they can help you order your affairs in the correct manner so that you are not paying more than you need to.

3. Maintain good records of all income and expenditure

Whether you decide to prepare and submit your tax returns yourself or hire an accountant to do this on your behalf, you will need to have good, full and accurate books of your income and expenditureso that your tax can be calculated correctly.

You will also need to keep all relevant paperwork that relates to income and expenditure, in the event that either you or your accountant need to refer back to it to clarify the tax status of a particular transaction.

You will also need to keep all your accounts (and the associated paperwork) on file, in case your tax return is queried by HMRC and you are subjected to a tax inspection.

4. Employ a bookkeeper

Keeping accurate and up-to-date records on a daily basis can be a difficult task if you are an individual or sole-trader who is busy with servicing the needs of their own business and its customers.

It’s easy for things not to be recorded correctly or for paperwork to get lost, so if you feel you do not have the capacity to do this yourself to the standard that is needed, consider hiring a bookkeeper to help you with your accounts. It takes the pressure off your professional life and also gives you some peace of mind that your financial affairs are being documented correctly.

5. Use new technology to help you

The fact that so many now submit their tax returns online shows how technologically advanced we’ve become as a society. It is not just the Government who have all the latest tools to analyse your books; they’re readily available to you too.

Accounting software is readily available. Give serious consideration to online Cloud-based solutions(such as Prelude Accounts) that allow you to keep your accounts up-to-date in ‘real time’ and on the move from a variety of devices.

This can alleviate the need for a bookkeeper and can also reduce the cost of using an accountant.

6. Don’t wait for the tax return deadline; prepare and submit your accounts for the financial year as soon as possible

Here in the UK, there is plenty of time to prepare your accounts for one financial year before you are legally obliged to submit them – six months before you have to submit a hardcopy submission, nine months if you want to do so online.

Use this time proactively and constructively, so you do not have any last minute stresses about getting your affairs in order in time for the submission deadline and so that you know well in advance what your tax obligation for the year is going to be.

Individuals who are required to submit a personal tax return might also be required to make payments on account to HMRC during the tax year. The sooner you know how much tax you owe the better you will be able to prepare if it turns out that you owe more tax than you have already paid or maybe less than you have already paid and are entitled to a refund. For such individuals, the deadline for settling your tax liability for a tax year is the same as for submitting your tax return for that tax year.

What Does Tax Return Deadline MeanThis is a question that is often asked by small business owners and people wanting to start their own business. Depending on your circumstances, VAT registration could be mandatory or you could decide to register voluntarily or not at all. In this article we will cover the main issues to help you decide.

What is VAT?

VAT (Value Added Tax) is a tax that is charged on most business transactions within the UK. It is also charged on some business transactions within and outside the European Union. VAT-registered businesses add VAT at the appropriate rate (usually 20%) to their prices for goods they sell or services they provide to their customers. It doesn’t matter if a customer is another business or a member of the general public; VAT-registered businesses must add VAT to their selling prices.

Different rates of VAT

There are three rates of VAT. The nature of the goods or services being supplied will determine the appropriate rates to be used for the transaction:

  • Standard rate – 20% and applies to most goods and services that are subject to VAT
  • Reduced rate – 5% and applies, for example, to domestic fuel and power
  • Zero rate – 0% and applies, for example, to fresh food, children’s clothes and shoes

Some goods and services are exempt from VAT and others are outside the scope of UK VAT system altogether. We will not discuss these in this article.

How does VAT work?

As I said above, VAT is a tax and so the VAT that is added to prices is not additional income for the business. A VAT-registered business is essentially a tax collector for HMRC (Her Majesty’s Revenue & Customs) and the VAT that is charged to customers must be paid to HMRC.

Typically this is done every three months by submitting a VAT Return to HMRC, which summarises the sales and VAT that has charged to customers during the period (the ‘Output VAT’) and the purchases and VAT that has been charged by suppliers during the period (the ‘Input VAT’).

The amount to be paid to HMRC is the Output VAT minus the Input VAT. So VAT-registered businesses can recover the VAT they are charged by their suppliers. Indeed, if Input VAT exceeds Output VAT in the period, which can happen for example if there has been a significant purchase of assets or stock, HMRC will actually refund this difference.

This isn’t as generous as it appears because, of course, the suppliers of those assets or stock will be paying HMRC the Output VAT on their sales. And so the charging, collecting and paying of VAT is carried on up the supply chain until a customer that is not VAT registered buys the goods or services. Here the VAT chain ends and it is this customer (business or individual) that ultimately pays the tax.

Must I register for VAT?

The question of whether your business should register for VAT is not entirely voluntary. If your total sales for the last 12-month period exceed £79,000 (or you think it is about to), it is likely that you will be legally obliged to register for VAT – no ‘ifs’ or ‘buts’. Note that this applies on a rolling 12-month basis and not a calendar or accounting year. Failure to register can result in fines imposed by HMRC.

If your total sales in a 12-month period are below £79,000 (this is called the ‘VAT threshold’), you do not have to register for VAT but, depending on your circumstances, it may be beneficial for you to do so. So what are the advantages and disadvantages of being a VAT-registered business?

Advantages of VAT registration

  • It makes your business look more legitimate. The fact that you are VAT registered psychologically reinforces the impression on your customers that you are working as a professional outfit.
  • It suggests stability and financial security. Because businesses are obliged to register for VAT once they have £79,000 of annual turnover, by voluntarily doing so would suggest to would-be customers or clients that you have already reached this threshold and that you are a financially secure, professional enterprise. Not only does it convey general success, it would reassure your clients or customers that you have financial reserves to support ongoing supply of products and services to them.
  • You can recover VAT that your suppliers charge you. As I explained above, VAT-registered businesses can recover the VAT they are charged by their suppliers as this reduces the VAT that must be paid to HMRC.
  • VAT would not be a cost to your VAT-registered customers. They would recover the VAT that you charge them in the same way that you would from your suppliers. Therefore, if your customers are mostly VAT-registered businesses themselves, adding VAT to your prices in itself need not affect your profits or theirs.

Disadvantages of VAT registration

  • VAT inflates your prices. VAT-registered businesses’ prices are immediately inflated by the rate of VAT (usually 20%). If you are not VAT registered, you can either undercut your VAT-registered competitors’ pricing quite easily or you could possibly match their prices and actually take more profit than them on like-for-like sales.
  • VAT would be a cost to your customers that are not VAT registered. They could not recover the VAT that you charge them and so this would increase the costs of their business. Therefore, if your customers are mostly not VAT-registered businesses, it would probably not be appropriate to register for VAT until you have to.
  • Paperwork and administration. More diligence is required to manage your accounting records as you will have to submit your VAT return once every 3 months and retain supporting documentation for at least six years. This, however, is less onerous than it once was due to easy-to-use accounting packages, such as Prelude Accounts.

Different VAT schemes

If you do register for VAT, there are a number of schemes to calculate, report and pay VAT to HMRC. You have some choice as to which scheme you can adopt but the size and nature of your business are the main criteria. We will not discuss these in this article but here are the three main ones:

  • Standard (or Accrual) Scheme The amount of VAT you owe or recover is based on the invoices that are dated during a period. This can cause cash flow problems if a VAT payment to HMRC becomes due before your customers have paid you.
  • Cash Accounting Scheme The amount of VAT you owe or recover is based on the dates of payments made and received during the period. This removes the cash flow problem as VAT payment to HMRC becomes due only after your customers have paid you. This scheme is available only to certain small businesses.
  • Flat Rate Scheme (FRS) This scheme applies to certain industries and can have a cash flow benefit in some circumstances. HMRC assign you a flat rate of VAT depending on the industry in which your business operates, for example 12%. You charge VAT at the appropriate rate (e.g. 20%) but you pay HMRC only 12% of your gross (i.e. inclusive of VAT) sales. This benefit is reduced because you cannot recover VAT on your purchases (with some exceptions) like you can in the other schemes.

Further help and advice

This article is by no means an exhaustive review of VAT. The amounts, thresholds, rates and schemes referred to are current at the time of writing. If you are in any doubt as to whether your business should or must register for VAT, consult with an accountant immediately as they will ensure that your financial affairs remain legal and are appropriately recorded.

As I already mentioned, you may not have a choice in the matter if your business already has sales in excess of the VAT threshold, but for those of you who run small operations it might be worth considering the pros and cons of doing so.

Ultimately, you can always contact HMRC. Their helpline should be able to answer all your questions.