Expansion means your start-up has succeeded in finding a market for your product or service, but the bigger you get the harder it is to meet all of your statutory obligations and keep regulators happy.
However, non-compliance could threaten the growth you’re trying to achieve with possible financial penalties, or even suspension from trading, harming both your bottom line and the reputation of your business.
Here are five questions entrepreneurs should ask themselves about compliance as their business grows.
1. Do you need a statutory audit?
Guy Wilmot, start-up specialist and partner in the corporate and commercial team at law firm Russell-Cooke, explains: “The threshold for the legal requirement for a yearly audit, the results of which are sent to Companies House, is hit if a company has turnover of more than £10.2m, assets of more than £5.1m or employs more than 50 employees.”
However, many businesses choose to be audited even though they’re not legally obliged to do so as it adds extra credibility to a company, for example, if it needs to raise finance from a bank.
2. Do you need a data protection officer?
Data protection officers are responsible for overseeing a company’s data protection strategy and its implementation to ensure compliance with General Data Protection Regulation (GDPR) requirements.
Guy says: “Instead of a specific financial threshold that applies to the appointment of a data protection officer (DPO), businesses need a DPO if they carry out large-scale regular and systematic monitoring of individuals or large-scale processing of special categories of data – for example, health data.”
GDPR guidelines say the regulation covers “core activities” that are “inextricable” to the company’s primary functions – not support activities like payroll.
3. Do you need a modern slavery statement?
Introduced as part of the Modern Slavery Act, which became law in 2015, it’s once again size that matters when it comes to a company’s legal obligations. “The requirement to publish a modern slavery statement only applies to businesses with a turnover of more than £36m,” explains Guy.
Companies in that category must produce a modern slavery statement for each financial year. The information it should contain includes details of a company’s anti-slavery policies, the parts of its business and supply chains where there is a risk of slavery and the steps that it has taken to assess and manage that risk.
4. Do you need to report a gender pay gap?
Since 2017, all businesses or organisations with more than 250 employees have been legally required to annually publish and report their gender pay gap information. Your calculations must be based on the ‘snapshot date’ of 5 April and the information can be published using the government gender pay service. The Equality and Human Rights Commission has the power to enforce any failure to comply with the regulations but the reputational damage of not reporting could be far worse.
5. Do your freelance contracts meet IR35 rules?
These regulations, also know as off-payroll working rules, come into force in the private sector in April 2020. They are designed to close a loophole in the tax system where workers could use the set-up of a limited company structure in order to pay less tax. The benefit for employers hiring workers in this way is not having to pay employers’ National Insurance contributions or give contractors employee benefits.
From next April a private sector company will be responsible for checking its contractors comply with IR35, and be liable for any unpaid tax, if that company has an annual turnover above £10.2m, a balance sheet total over £5.1m, or more than 50 employees. There’s much more guidance available on these rule changes at the gov.uk website.
This article is written for the St James’ Place Entrepreneurs Club newsletter. The opinions expressed by third parties are their own and are not necessarily shared by St. James’s Place Wealth Management.
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