Complacency is the real business killer

Is complacency the real reason why businesses fail?

You’re probably thinking, “Oh no, not another one of those ‘why businesses fail articles’”. This article is certainly about why businesses fail, but this one is looking at the issue from a slightly different point of view. You see, the pandemic, for all its downsides, affords us a view of business issues from an accelerated lifecycle perspective. As an accountancy practice in London, Tax Agility we’ve learnt a lot over the past year.

In just a short space of 12 months, businesses have been hammered by a range of common issues one might not expect to see all at once during the normal lifecycle of a small business. At least not in such a short space or time, or as a result of a cascade of other business related troubles.

Business turmoilFor instance; it’s common for a business to fail because it experiences cash flow issues, or the loss of a major client, or staff turnover, problems or supply chain issues, or reduced seasonal footfall, even the occasional export/import issues. In recent times though, some businesses have experienced all of these, all together, as a result of both pandemic issues and the fall-out from Brexit impacting European supply routes and trading partners.

In a normal business lifecycle, all these issues can surface from time to time, sometimes over many years, and many can be weathered if handled competently. However, the global pandemic and Brexit have effectively put many businesses in a lab test tube, exposing them to a variety of tests within a short space of time. Many business owners and entrepreneurs have struggled with this. Furthermore, many more mature businesses have found that their business models simply cannot weather this type of storm.

While it’s easy to simply blame the pandemic or even Brexit, for some, the reason the business failed is not just because of these two protagonists. It’s likely that the business was already weak due to several other non-visible issues. The pandemic and Brexit have acted as a catalyst and exposed an underlying complacency in the way business has been done up to now.

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Complacency in business is a killer

complacency kills businessesIt’s important to be clear here, there’s no suggestion that a business fails because the operator of the business is sat twiddling their fingers or just counting the cash coming in. That’s not what we mean by complacency. Complacency can be as simple as working hard to meet business goals, but without acknowledging that the markets are changing around them. It’s a case of being overly ‘self satisfied’. The root cause can often be attributed to fear – fear of change, fear of upsetting what appears to be working. Under such circumstances a business owner simply convinces themselves that all is okay, rather like looking in a mirror and only seeing what you want to see.

The problem could best be exemplified by what has happened to the High Street, particularly larger stores. Such stores rely extensively on foot traffic, so when this dried up during the pandemic, so did cash flow. Some did have an online element to their business model, but not enough to support the operational cash requirements of the business when regular footfall derived income fell away.

Competitive business models will erode your primary revenue sources

You might be thinking that it’s a little harsh to criticise stores for not foreseeing something like a pandemic. The reality though is that more and more business is being done online, the trend is clear and some businesses simply haven’t adopted this extensively enough or quickly enough. Of course, it’s harder for some product lines to adapt because of the need for consumers to interact directly with this products. But not for all though, especially consumer electronics, many leisure items, regular domestic consumables and many others. Even retail apparel, although harder to manage online, is destined to increase further.mail order catalogs

Buying without fist seeing a product is far from new. Mail order has been around since the 60’s – the 1860’s!  The first mail order business was formed in 1861 by Welshman Price Pryce-Jones.

Another famous clothing and fashion related mail order catalog, Grattan, started life in 1912 and became very popular in the days prior to the internet, along with Littlewoods, Kays, Freemans, Marshal Ward and Great Universal Stores. Much has happened to them since the internet revolution. Most have either been acquired or evolved, with a web front being a major part of their business model. Take Littlewoods for instance. After merging with Great Universal Stores to become Shop Direct in 2003, was launched in 2009. They pride themselves on consistent reinvention. Check out Very’s story here.

Retails stores have been popular because people like to go out and shop. Will this continue? Probably. However, the population has now had an experience like no other and along with other pressures, such as the parking ordeal many towns now represent for those driving, and Covid’s likely legacy, the attraction may wane. The point is, alternatives exist, business models evolve, consumer appetites are fickle and popularity can change in an instant.  If you don’t have a Plan B, then beware. In fact, if your Plan B was the internet, it probably now needs to be Plan A.

Innovation, make it part of your company’s culture

Innovation is central to a business being able to keep up with the fast pace change we see in today’s consumer markets. We believe that for a company to be truly successful, innovation must be part of its culture. Just like Very. If it isn’t, employees and key management are likely to get complacent, because they are on the same tread mill everyday, with little motivation to explore new ideas and way to better serve their needs innovation

Of course, we recognise that most companies have an eye on where their markets are going. More often though, the changes they foresee are not necessarily seismic in nature. Often they represent new product or service derivatives – more subtle shifts, as opposed to something that represents a completely different way of working. The latter represents more of an environmental response. Environmental pressure is the most likely catalysts behind evolution – not just in nature, but in business too. Nature is a great teacher.

Innovation should be a key focus area for a business’s management, not just product or service improvements, but also environmentally, in how markets and consumers are reached, engaged, and fulfilled in response to changing attitudes, technologies and needs.

It’s not just a case of, ‘lets get online’ either. That ship has sailed, so to speak, as every business should have an online aspect to their brand. Innovation online today requires thought around user experience, and how to create a better ‘experiential’ dimension to a user’s journey.

Complacency is behind many of the commonly associated reasons for business failure

The following represents a list of some of the most common reasons why a business fails.  There’s nothing new in terms of the reasons. However, if we look at these with a somewhat different eye, it’s not hard to see the part complacency plays.

1. No viable business or marketing plan

No viable business planThe business has been set up, undoubtedly with good intentions and a vision, but without any form of business planning – basically, on a ‘wing and a prayer’, because the person behind it believed totally in what they were doing, perhaps even disregarding what others were saying or what the market indicators suggested.

A business plan is meant to take a good look at the realistic requirements for a business to achieve success, the resources required, and timescales. It should also look carefully at contingencies given associated risks with the target market. For instance, what would happen if first sales don’t come within the planning timeframes? How much cash would the company need to cover the deficit and how long could it survive before sales revenues begin to appear?

Excited entrepreneurs can often cast risk to the wind, believing firmly in themselves and ignoring sage advice or overly satisfied with early encouragement from prospects. How often have you heard a potential prospect, lavish praise on a new product you are trying to sell, provide endless encouragement, but then not buy.  The danger is that a business owner can believe the hype over reality and become overly self-satisfied in the strength of the product and market acceptance. In other words, complacent belief in success, despite other possible waning signs.

As a small business accountancy firm, we are always surprised how often we find businesses that run in to problem for the simple reason that they either don’t have a business plan (or marketing plan). Don’t make this simple mistake, it’s business 101.

2. Lack of a strong value proposition

no value propositionSimilar in nature to lack of a business plan, not having a strong value proposition clearly articulated and tested, can stem from over confidence gained from an early interest in a product or service from friends and family eager to boost egos. Ultimately, only your target audience really matters and early affirmation of product viability through market research should replace friendly encouragement as the basis of the business. Put simply, does the market actually need your product and do they buy into the value it professes to offer?

3. Lack of cash

A fundamental mistake many new small businesses make is to run out of cash. They just get the numbers wrong. Again, it’s usually due to over confidence, over estimating revenues, underestimating timescales and underestimating flow issues

Few plans ever go to exactly to plan, there are always hiccups and unforeseen problems. How well you have built contingencies to cover the costs of these ‘problems’, will determine how likely you will survive if a problem becomes extended and starts eating into cash. A common cause is simply due to revenues not arriving to plan. This is almost entirely out of the hands of the business, unless it’s secured early orders, but once they have been fulfilled, ongoing revenues need to happen quickly.

As we saw with the pandemic, it’s likely the vast majority of small businesses would not have survived unless they were given cash lifelines – either loans or help to pay salaries. However, few could have foreseen the extent of the crisis and there’s still an uncertain future, as many business still don’t know if their markets will return to a level that will support their operational cash flow needs.

As accountants working with a variety of small business types, our tip is to at the very least spreadsheet your cash flow workings, be realistic and brutally honest with yourself – look at worst case scenarios and build up from that. Do this regularly too, especially if circumstances change.

4. Over reliance on a few large customers

Over reliance on a few large clientsIt’s a nice feeling, having a couple of really great clients feeding your cash flow each month. For some business owners, such reliance would make them feel distinctly nervous. However, for others, especially those who have a great working relationship with their clients, perhaps are even friends, complacency can set in.

Tax Agility Accountants also works with its clients as business advisers, and businesses with a heavy reliance on a few major clients is an all too familiar pattern, especially with smaller or niche clients.

The problem is that you may never know there’s a problem with a client until it’s too late. When a business gets into trouble, it can be tough for a business owner to admit this to themselves and take action early. Also, because pride and ego play a part, a troubled business owner may not let his clients or suppliers know. Ultimately, the troubled business stops paying its bills, leaving your business looking at a write-off. As time ticks on, complacent business owners realise that they may not be able to fill the revenue gap quickly enough, as new business development can take a lot of time, especially for specialist or niche products and services. If this isn’t reconciled quickly, cash flow problems arise and that company’s ability to pay its debts leads to insolvency.

The answer here is to always have more clients that you actually need to make a comfortable profit margin. Don’t let a few large clients dominate your cash flow security.

5. Taxation oversight

Tax and VAT oversightTax is a complex discipline, made worse where issues such as overseas VAT is concerned. Always get specialist advice, especially now we are post-Brexit and the situation with the EU is far from clear.

Don’t make the mistake of simply assuming you don’t have to pay taxes.  Or indeed, that the country you are doing business with won’t demand tax is deducted until you can prove where your company is domiciled, can be simpler said than done. There’s a heavy focus by governments at present on taxation as applied to digital products and services.

Having a chunk of change removed from your expected invoice payments, because a clients obliged to hold back tax payments, can cause serious cash flow issues.

Tax advice and tax planning are key services Tax Agility provide. It is a complex issue, so take good tax advice if you are in any doubt

6. Dependency on key staff

key staff and trust issuesHaving people you can trust in key positions within your business is a great help and a boost to confidence, in that you believe somebody ‘has your back’ and is working with your’s as well as their own interests at heart.

However, one can get complacent and start ignoring the warning signs that all may not be well with your ‘partners in business’, or indeed people you rely onto get fundamental aspects of the job done. Circumstances might arise where a key person becomes incapacitated or unreachable on holiday. Business may become severely affected. Worse still is the prospect of effectively being held to ransom by a key skill bearer who suddenly decided that they are unhappy.

People are naturally defensive where sharing aspects of their work is concerned. For some, the thought that they could be replaced is unbearable. At some point the “you couldn’t do this without me” syndrome becomes a clear and present danger to the business, especially if the individual concerned is a key member of the team.

Always ensure other people can cover the roles required and, make sure this attitude is part of the company culture and embraced by all.

The other concern with dependence on key staff is the potential for fraud. It’s a subject of its own. We have an article on small business fraud here.

When people believe they have your complete trust, some may take advantage of this, or find themselves pressured in exploiting your trust because of negative personal circumstances. Don’t get complacent, review your relationships and levels of trust within the business regularly, so you can spot the warning signs.

Final thoughts

When it comes to the main reasons why businesses fail, there’s nothing new under the sun, as the saying goes. However, what recent events have taught us is that the catalysts for failure can be different to what we might normally be used to.

Is what we experienced recently just a ‘one-off’? An extraordinary event? Possibly. But, consider the pace of change we have seen in other areas of business over the past few years, such as new technologies, significant growth in internet enabled businesses, and the need to adapt to fast moving consumer / client trends as they adopt different buying or working practices. Such changes point to a future requiring businesses to be far more innovative and adaptable, not taking their client base for granted and definitely not being complacent in their day-to-day operations and outlook.

If you are concerned about the issues your business is facing, act today. Tax Agility accountants provide specialist accounting services for small businesses. We’re based in Richmond and Putney, but serve clients throughout London and the south east. Contact us here.

Why not check out our series on building a better business here.

R&D Tax Relief Scheme Changes 2021

Changes to the SME R&D tax relief

Changes announced late last year concerning the R&D tax relief scheme come into force on April 1 this year, are you ready?

R&D Tax Relief Scheme Changes 2021Aiming to put UK at the forefront of R&D and help companies compete on the world stage, the government has introduced various R&D tax reliefs, including R&D for small or medium-sized enterprise (SME), universities and charities, as well as R&D Expenditure Credit for large companies.

From 1 April 2021, the new SME R&D tax credit scheme will take effect, with the introduction of a cap on the amount of credits that could be claimed.

An overview of the SME R&D tax relief scheme

When the SME R&D tax credit schemed was first introduced in 2000, it had a cap on the amount of credits that a company could claim. In 2012, the cap was removed, thereby allowing eligible companies to deduct an extra 130% of their qualifying costs from their yearly profit, as well as the normal 100% deduction, making it a total of 230% deduction. Even when a company was making losses, it could still claim a tax credit worth up to 14.5% of the surrendarable losses.

The system was subject to abuse and fraud – HMRC announced that they had detected and prevented fraudulent claims amounting to over £300m in recent times. Many deceptions included people setting up a UK-based entity just to claim tax credit despite no R&D work was actually performed in the UK.

Consequently, from 1 April 2021, the government will introduce a cap, limiting the payable R&D tax credit to three times the total PAYE and NIC liability of the company for the year, plus £20,000. This also means that the first £20,000 of repayable tax credit claim will be exempt from the cap, thereby protecting smaller SMEs with few employees.

For a genuine SME that employs people to carry out R&D work in the UK, the new changes will have little or no impact. However, for a company that doesn’t have any real UK-based activities, or one that doesn’t employ people but relies on subcontractors, the new rule will discourage them from making an R&D tax credit claim.


The new changes will not apply to companies that:

  • Have employees creating, preparing to create, or managing Intellectual Property (IP), and;
  • Do not spend more than 15% of its qualifying R&D expenditure on subcontracting R&D to, or the provision of externally provided workers (EPWs) by, connected persons.

R&D and IP creation

Ideally, R&D work would lead to IP creation, and if this is the case, your company could also take advantage of the Patent Box – a scheme that allows companies to apply a lower rate of Corporate Tax to profits earned from its patented inventions.

‘Related party PAYE’

In calculating PAYE and NIC liabilities, claimants may include related third parties, i.e. those companies performing R&D activities on the claimants behalf, as long as the work is directly attributable to the development activity.

Talk to Tax Agility

The first step is to seek professional guidance on this issue if you aren’t sure how it is going to impact your business.

Small Business: 5 ways to get new customers

For many small business owners, the top priority is always this: how do I get more customers?

Every small business owner knows that it is risky to rely on a regular base of clients, particularly when customers today tend to change their product or service providers often. The most desired outcome is to have a continuous stream of new customers, with some of them becoming loyal customers and thereby allowing the company to grow and expand organically.

Yet the task of finding new clients is easier said than done.

Traditional approaches to finding new customers – such as cold-calling and door-to-door marketing – require excellent communication and people skills, which not everyone possesses. On the other hand, modern marketing techniques can also be challenging for small business owners who struggle to keep up with the rapid evolution of technology, not to mention that some techniques like email marketing are also restricted by GDPR regulations. With this in mind, our small business accountants aim to discuss and explore a few tips which can hopefully help entrepreneurs like you gain new customers and generate new sales.

1. Finding new customers online

If you are running an eCommerce business, chances are, you have explored many online opportunities and now reap the benefits from your website, social media, online reviews, plus other eCommerce platforms and content tools at your disposal.

But if you run a traditional business, one that doesn’t sell online or has a small digital footprint, can you still gain new customers online? The answer is yes. Technology has indeed created a level playing field for companies big and small. Take a client of ours for example – this is a dedicated transport provider who relies on local business and has a simple website, yet thanks to the internet, he can now identify other local groups and associations that match the profile of his target customers. In addition, he also runs an online pay-per-click campaign targeting people in his immediate vicinity. As a result, he is able to get new clients and can keep building his customer base.

2. Finding new customers through networking

There are thousands of networking groups across the UK, many of which are eager to help business owners build relationships and explore new opportunities among their members.

Networking, at its core, is about building relationships that could produce mutually-beneficial opportunities, including quality leads. As one of our clients put it, “Effective networking is like having a good sales team but without carrying the overhead.” This is so well-said because when you make a new contact, you can potentially reach out to all the friends and business associates whom the individual has made.

Despite its benefits, you must also be prepared to reciprocate, meaning you must be willing to introduce your contacts to people in your network and help them to grow their business, just as they would help you to expand yours.

Recently, there has been a move from traditional greet-and-meet to ‘video-centric’ networking, where members meet and discuss opportunities via video conference calls. Some small business owners find this less stressful than meeting in person and if this suits you better, do give it a go.

3. Finding new customers through engagements

Raising your profile through a series of speaking engagements or getting featured in the news is fast becoming a popular option among small business owners.

Undoubtedly, speaking at a conference or an event – ideally one that is attended by your target audience – is likely to boost your credibility and help to reinforce your position as an expert in your industry. When your prospects see you as an expert, they are more likely to do business with you and become your clients. However, beware that most speaking engagements do not allow you to do the hard sell. Rather, you are expected to share your expert knowledge with the audience, preferably in a fun and engaging way.

Getting featured in the news (which can be newspapers, magazines, on radio or TV) is another way to raise your profile and build influence. While you can certainly contact journalists directly, there are also many PR sites that allow journalists to reach out to the small business owners and get their story across to a wider group of audience.

In addition to sharing serious business insights, you are welcome to pitch light-hearted stories. For example, a client of ours once helped to direct traffic and rescue a swan that was trapped on a central reservation a short distance away from his store – his story was featured in the local news and in the weeks that followed, he had more visitors to his store than ever before.

4. Partnering for success

Teaming up with another business that offers complementary services is a proven strategy that can help you and the partner to broaden product awareness, increase brand recognition and expand customer base, while saving costs for both parties.

The trick, however, is to find a partner who is on the same wavelength as you – having similar work ethics, believing in fairness, respecting and accepting each other’s shortcomings and sharing same goals, which are just some essential elements of a powerful partnership. Before any collaboration, it also pays to conduct due diligence on the other partner, and establish clear agreements and boundaries.

5. Give (some) stuff for free

Everyone loves a good bargain, which is why many of us look for discounts, sign up for a free trial, love a free sample, and shop with companies that provide free shipping, to name but a few. The objective of this is to encourage the prospects (who have received some free stuff), to take up your main services or purchase your products.

At Tax Agility, we also give a free introductory consultation session to new customers who are considering our accounting and bookkeeping service, as well as offering free quotes to customers needing tax or payroll management services. What we do is not unlike an optician giving you a free eye test or a car salesperson allowing you to take the car out for a test drive.

It is widely believed that your prospects respond more positively (albeit unconsciously) when they get something for nothing. For instance, they may believe that you are very generous and they are more inclined to reciprocate your generosity by becoming your customers.

Tax Agility is here for small business owners

At Tax Agility, our small business accountants work in tandem with entrepreneurs across London, Putney and Richmond. Our aim is to help entrepreneurs like you get the business account in order, so you can use the financial data to make informed decisions and grow from strength to strength.

Our services include:

  • Accounting & Bookkeeping: leave your day-to-day finances to us. We will also provide monthly management accounts, prepare statements and help you set-up cloud accounting.
  • Tax: if you are tax-efficient, you will have more money to invest, expand and create jobs in your community. Let us help you with tax planning, tax computation and tax returns.
  • VAT: from VAT returns to manging VAT on import and export goods, we take care of them so you don’t have to.
  • Payroll: As your team grows, outsource your payroll administration to us so that you and your team can continue to enjoy accurate and on-time payslips every month.
  • Management consultancy: take your business forward with practical advice based on financial data and benchmark analysis.

Call our small business accountants today on 020 8108 0090.

Alternatively, you can use the contact us form to get in touch.

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This blog is a general summary. It should not replace professional advice tailored to your specific circumstance.

A concept image of starting a business

Starting a part-time business

Not ready to take the leap, consider a business on the side while keeping your main employment.

A concept image of starting a business

Having a full-time job is, for many people, the path to job security and financial security. While employment is a more comfortable choice when compared to setting up, owning and running one’s own business, the pace of technology growth and a less than stable economy in recent times have threatened this supposed ‘safe-haven’.

Many working adults have come to realise that relying on full-time employment as their only source of income is potentially risky, as jobs can be outsourced or replaced, plus changes in business fortunes can leave them facing the stark reality of unemployment. Accordingly, more and more working people are considering starting a business on the side and seeking additional income streams. If you’re facing a similar situation, this post may make a great read.

Benefits of starting a business on the side

Starting your own business on the side while working full-time can seem quite a hill to climb, but the benefits often far outlay the early pains soon. For instance, after getting a business going and experiencing your first success, a side-line business could soon:

  • Provide a second income that supports the payment of your rent or mortgage, or ideally, help to pay down the mortgage more quickly than your main job could do on its own.
  • Lessens the impact of losing your job. In many cases, people who have started their own businesses on the side often quit their jobs to focus on the business full time later. This comes once they are confident that the business has overcome any initial teething problems and can continue to support their dreams.
  • The second income, or additional disposable income, could also help to afford a few extra luxuries in life.
  • Running your own business often brings you into contact with people in a similar situation. These interactions will broaden your circle of acquaintances, leading perhaps to greater opportunities.

While there are many benefits, it pays to be clear about what you want to achieve before setting up a part-time business though. Do you want it to be just a part-time or seasonal thing, or do you see it as a potential replacement for your main job? Setting realistic expectations is critical, and can help you to be better prepared too.

Things to prepare before starting your part-time business

While there are few businesses that just followed an idea and been successful right out of the gate, in reality most entrepreneurs spend a fair amount of time on planning and preparation. The main reason is that even the best and most innovative ideas may not turn into great business concepts, unless there is a nurturing environment to help them flourish.

Write a business plan

The first advice most seasoned business people give to budding entrepreneurs is to write a business plan. While there are no rules on what you should include in your business plan, standard items like stating your goals, highlighting market research, operation plan and financial strategy will help you see your business more thoroughly.

A concept image of resaerchConduct research

At the very least, you should know:

  • The needs and preferences of your target market
  • How are you going to find your customers?
  • Your competitors
  • Their price points versus your pricing strategy
  • Do they have any gaps in their product or service you can exploit?
  • What makes you different from them?

Know your responsibilities

If this is your first attempt at starting a business, you may not be familiar with all the responsibilities and duties of running a business. For example, if you are selling toys, your products need to comply with the provisions of the Toys Regulations 2011, meaning they must bear the CE mark, satisfy the ‘essential safety requirements’ in the regulations, be properly marked to ensure traceability, and be accompanied by instructions for use, along with warnings where necessary.

Crunch some numbers

The first number-crunching exercise you do should be about cost, revenue and profitability – because everyone wants to run a profitable business. Be sensible in how you plan your costs – especially marketing costs, as they are essential to get your products or services to the right people. Equally, be realistic about how much you can make over a period of time. Create a pricing strategy and calculate your break-even point. Find out about the risks you are exposed to and ways to mitigate them.

The second part of finance relates to funding. In essence, your plan to get the funds needed to launch and support the business until it turns a profit. There are a few types of funding – self-funding, funding through debt (borrowing money to start your business), equity (trading away ownership of your company to receive funding), and mezzanine (a combination of debt and equity). Most part-time businesses are either self-funded or through borrowing from friends and family members. Both approaches are helpful, albeit risky, so it is wise to have a back-up plan and know when to source for additional funding later. If you’d like to know more, follow the link to the article The complete guide to business funding.

Choose a company structure

Choosing to start your business as a sole proprietorship or as a limited company can impact how much tax you pay, how far you want to protect your personal liability, how much you want to pay to maintain the company, and how much administrative work you want to do it yourself. At Tax Agility, we help entrepreneurs to set-up a structure that works for them. If you’d like to talk to us about setting up a company, call us on 020 8108 0090 today.

Beware of pitfalls

Working fulltime can be exhausting, and by the end of a long work week, you probably do not have the time and energy to work on your part-time business. Add to that family obligations, and you may quickly find yourself defeated. One way to overcome this is to outsource the work you aren’t good at, if you have the initial investment funds ready. For instance, if you need a website, hire a good web company. If you need advice on company structure, talk to a qualified accountant like us.

Also, beware that those around you may not be as enthusiastic as you are. It goes without saying that to start and run your own business, you need to believe firmly in yourself and know what you want to achieve. Having a clear set of goals and milestones is critical. And, don’t forget to reward yourself a little along the way too.

Once your business takes off, you will soon find yourself spending more time with your clients. The challenge of juggling your time with the new venture may start affecting your day job, leading to undesirable consequences like making mistakes on your job and losing your job before you’re ready to quit.

Popular part-time businesses

Here are a few ideas to help you get started.

  • Selling products on an e-Commerce platform
  • Creating creative products – videos, pictures, jewellery etc
  • Providing handyman services
  • Becoming virtual assistants
  • Becoming a freelance designer
  • Writing for websites

Tax Agility is here to help small business owners

As leading small business accountants in London, Putney and Richmond, we have gladly worked with many entrepreneurs who started small and grew organically over the years. In the process, we become their trusted go-to accountants as well as business advisors.

Our services include:

  • Accounting & Bookkeeping: leave your day-to-day finances to us. We will also provide monthly management accounts, prepare statements and help you set-up cloud accounting.
  • Tax: if you are tax-efficient, you will have more money to invest, expand and create jobs in your community. Let us help you with tax planning, tax computation and tax returns.
  • VAT: from VAT returns to manging VAT on import and export goods, we take care of them so you don’t have to.
  • Payroll: as your team grows, outsource your payroll administration to us so that you and your team can continue to enjoy accurate and on-time payslips every month.
  • Management consultancy: take your business forward with practical advice based on financial data and benchmark analysis.

The beauty of working with us is that you have the freedom to choose the level of engagement you want from us – for instance, you may need us to manage bookkeeping for now, give you tax advice when you need money to invest, add payroll when your team expands, and use our management consultancy service when you are ready to grow. All of our services are competitively priced with no hidden charges, and our small business accountants are always here to assist.

Call us today on 020 8108 0090. Alternatively, you can use the contact us form to get in touch.

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This blog is a general summary. It should not replace professional advice tailored to your specific circumstance.

Social media icons concept

Small Business: Adapting to changes in social media

Many small businesses view social media as an important component in the marketing mix, but have you kept up with the changes?

Social media icons concept

Many social media services that we are familiar with today are well over a decade old, with some approaching 20 years soon. Yet many of them don’t remain still – they continue to evolve and adapt, pushing out new features that aim to make communication easier. In view of this, small business owners like you and I are wondering what does it all mean? Do we have to continue using social media as part of our marketing mix? And if so, how do we adapt? Questions like these deserve honest answers, so we think it is time to create a post that can help us – and also our clients – to understand social media better.

Before we start, it must be said that we are not social media experts – our expertise lies in accounting & bookkeeping, tax, payroll and management consultancy for small businesses across London. We work with clients and help them become efficient, meet regulatory compliance, and confidently rely on accurate financial data to make informed decisions. When our clients grow, we grow too, which is why we are always keen to share ideas that can benefit small business owners, including how all of us can harness the power of social media better.

Social media for small businesses

Social media refers to internet services and mobile applications that allow users, including individuals and companies, to share content and interact with others. As these services are free and easy to use, they can attract millions of users in a short space of time, and with that many people congregating on any one of the platforms, companies big and small soon realise the potential of social media.

Nowadays, most companies spend time crafting social media posts and share them on popular platforms such as Facebook, Twitter and Instagram. Those with a bigger budget also create videos and post them on YouTube and TikTok. Essentially, they all hope that their content is viewed and shared rapidly, thereby broadening their reach.

But social media isn’t all rosy and full of promise. It has given unhappy customers, jealous competitors, disgruntled ex-employees and even trolls a platform to complain, provoke, with some choose to hurt your brand on purpose simply because they can.

Big companies respond to these negativities by hiring a team to investigate, monitor and talk to customers directly. But small business owners tend not to have such luxury, leaving many question the benefits of social media. With this in mind, let’s look at a few areas which can help small businesses.

Take another look at your social media strategy

If your small business has been posting on social media for a while, chances are, you will continue to do the same without giving it much thought.

A good place to start is to take another look at your social media strategy and ask what social media can do for your business. To get the answer, you need to look at your customers, your competitors, and also your financial data. In other words, you are examining several key factors, including but not limited to:

  • What is the purpose of your social media strategy?
  • Where does your target audience congregate online?
  • What information is relevant to your target audience?
  • What are your competitors doing on social media?
  • What social media inspiration can you draw from industry leaders?
  • How much do you intend to spend?
  • How do you evaluate the process?
  • How do you measure success?

Once you have reviewed your social media strategy, the next step is to understand the risks of social media so you can actively avoid them. Some common risks include:

There may not be any tangible return

While social media can help to amplify your brand, often it may not contribute to tangible return. For example, a person seeing a short video clip of your service may not call you and become your client. Sometimes, it can be hard to measure the return on investment too.

Undesired information may go out of control

You may make a mistake in one of your social media posts, a troll may decide to inflict hurt, or a customer’s complaint may have gone viral, when this happens, it is hard to control the spread of undesired information.

Making a situation worse

When a small business owner responds in anger, or when a company’s social media team cannot adequately handle customer complaints, things can go out of hand quickly and the domino effect can undo a company’s years of hard work in just a few hours (or less).

Legal issues

Every content you use online must adhere to the appropriate policies like copyright law and privacy legislation. Otherwise, you are putting yourself and your business at risk.

A few tips

Every business uses social media somewhat differently, depending on their strategy, however, there are a few common tips that we believe can benefit small businesses.

Local versus international

It is said that there are now 3.5 billion social media users worldwide, but if you are a brick and mortar company relying on local footfall, this astronomical number probably doesn’t mean much to you. Instead, you may choose to advertise locally (through local targeting or using selected hash-tags).

Show personality with care

Everything you post on social media is a reflection of your company – this is why sticking to the script is safe. You can, of course, show some personality by using emojis to inject some fun. At Tax Agility, we choose to share an inspiration quote once a week to encourage fellow small business owners.

Don’t respond when you’re angry

Social media gives many unhappy people (customers, competitors and trolls) a platform to vent, but it doesn’t mean that you need to act when you’re angry. Stay calm and remain professional. Also, don’t confuse angry customers with trolls who simply want to provoke and hurt.

Plan your posts

Many popular social media posts today are carefully crafted, accompanied by an appropriate picture or a video. So it is worth planning out your posts and making sure they are suitable for your audience.

Tax Agility is here for small businesses in London

Like many small businesses, we are still working on how to better engage our target audience – and also our customers – on social media. While we may not be able to assist your day-to-day management of social media, we certainly can help small business owners rest easy, knowing that their accounting & bookkeeping, tax, as well as payroll management are in our capable hands.

Our approach is flexible and entirely depends on your business needs. You can hire our bookkeeping and tax services now, add payroll when your team grows, then use our management consultancy service when you are ready to take your business to new heights.

All of our services are competitively priced with no hidden charges. Call us today on 020 8108 0090, or use the contact us form to get in touch.


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This blog is a general summary. It should not replace professional advice tailored to your specific circumstance.

A concept image of outsourcing

Small business: Gain competitive advantage through outsourcing

Outsourcing allows small business owners to optimise the use of resources and achieve maximum customer value.

A concept image of outsourcing
In today’s business ecosystem, small business owners are familiar with the concept of outsourcing, which is to use third parties to perform work that is normally done within a company, as the third parties can provide a better service at a lower cost.

At Tax Agility, we have a team that is dedicated to serving companies’ outsourcing needs in accounting and bookkeeping, as well as payroll. Over the years, we have built up strong relationships with our clients and witnessed the advantages of outsourcing brought to them. If you are a small business owner looking to outsource your bookkeeping and payroll, give us a call on 020 8108 0090.

The eight benefits of outsourcing

1. Lower costs

The true costs of hiring a full-time staff can be substantial once you add National Insurance, pensions, benefits, as well as office facilities and equipment which you need to provide for the person to work. Outsourcing is often a cheaper alternative.

2. Increase efficiency

Companies that focus on core competencies and outsource activities they aren’t good at tend to be lean and efficiently-managed. For example, if you rely on third parties who have the economy of scale to perform the same tasks inexpensively, you can pass the savings to your customers and remain competitive.

3. Improve flexibility

Outsourcing allows you to pick and choose the level of engagement that suits your business at a particular moment in time. For instance, you can select the bookkeeping service from us when you first launch your business, add payroll when your team expands, then engage our management consultancy service when you are ready to grow and take your business to new heights.

4. Access to specialists

Outsourcing allows small businesses to access the same level of expertise enjoyed by big companies. For instance, a small business may not afford to hire a full-time CFO, but by outsourcing and becoming our client, you now have a team of chartered accountants who are ready to assist.

5. Reduce risk

Our chartered accountants and payroll specialists help to reduce your financial and compliance risks by managing every task accurately, including sending the right documents to HMRC on time.

6. Not affected by staff holiday or sickness

The companies that you outsource the work to often have a big team that can provide year-round cover; therefore, your tasks and deadlines are not affected by staff holidays or sickness.

7. Increase confidentiality

Most offices today have an open-plan layout with limited storage space. Confidential data such as salary information may be left on a table or stored in an unlocked cabinet that can be accessed by all employees. When you outsource a business function that contains confidential data, you essentially increase confidentiality within your office.

8. Support your wellbeing

It is no secret that small business owners take on a lot, with some work so hard that they experience stress and anxiety. Outsourcing is a cost-effective way to help busy entrepreneurs reduce workload, giving them time to focus on their strengths and their mental wellbeing.

Five popular business functions to outsource

Small business owners tend to outsource niche business functions that require specialists who know what they are doing and can generally do the tasks cheaper and better. These functions include but not limited to:

  • IT support – covering network, wireless, cyber-security, database management, web development, and digital transformation.
  • Accounting & bookkeeping – from day-to-day bookkeeping to filing the right documents with HMRC and Companies House.
  • Marketing – evolving quickly, marketing today has a sharper focus on email, social media, video, search advertising, native content advertising, and apps.
  • Customer support – having first-level customer support that can provide quick answers to customers and keep them happy is valuable.
  • Payroll – every payslip in the UK must be calculated accurately and delivered on time, this complicated process is best left with the professionals.

Choose Tax Agility’s accounting and bookkeeping service

Tax Agility has worked with small businesses in London, Putney, and Richmond-upon-Thames since 2008. We have worked with entrepreneurs from all walks of life and different companies with varying business models.

Our accounting and bookkeeping services specific to small businesses cover everything from basic data entry to high-level management reporting and analysis. Accurate financial data that we provide, such as management accounts, budgets, cash-flow forecasts, can also help you to:

  • Improve profit margins
  • Reduce costs
  • Compare performance
  • Make informed decisions
  • Unlock business potential
  • Ensure regulatory compliance

Call us today on 020 8108 0090.

Choose Tax Agility’s payroll services

Payroll demands absolute accuracy, and each payslip must be calculated individually and delivered on time. Our payroll team has worked with all types of industries, including companies that offer commissions, ad-hoc bonuses, as well as restaurants, bars and hotels that use the TRONC scheme.

By outsourcing your payroll administration to us, you can keep your costs down while maintaining accuracy and efficiency. Our team also provides year-round covers, so your Full Payment Submission to HMRC is always on time, undisturbed by staff holidays or sickness.

Call us today on 020 8108 0090.

Other services

Apart from bookkeeping and payroll, we also provide tax and VAT services, along with management consultancy to small businesses across London.

Our aim is to assist entrepreneurs in becoming tax-efficient, so you have more money to invest, expand and create jobs in your community.

Management consultancy also puts a sharper focus on using financial data and benchmark analysis to improve efficiency, increase profitability and grow sustainably.

The challenges of outsourcing and how to address them

Outsourcing has indeed helped many small businesses to grow from strength to strength, but it is not without some challenges. It is useful to discuss a few tips that can help you navigate around common pitfalls.

Choose a reputable company

Only outsource your selected business functions to a reputable company that belongs to a trade organisation with a defined code of ethics. For example, we are ICAEW (Institute of Chartered Accountants in England and Wales) chartered accountants, and we follow a set of principles, including integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour. This means that as our client, you will receive honest answers from our knowledgeable teams who keep abreast with the latest developments in practice, legislation and techniques. We also act diligently and respect confidentiality.

Formalise processes

Formalise a set of guidelines which you want the outsourced company to follow and communicate your expectations clearly. This way, you have greater control over the quality of services rendered.

Check their data security commitment

If the tasks you outsource involved confidential information, like customer information or personal data from your employees, ask the provider what steps they have to keep the data secure, and what happens if there is a breach.

Local versus overseas

Outsourcing to local companies may also work better for some businesses, as they don’t have to manage time differences and cultural barriers. At Tax Agility, our offices are in Central London, Putney and Richmond-upon-Thames, so clients could pop in to ask a question at any time, without having to worry about time differences.

Outsourcing has indeed helped many small businesses to scale, remain efficient and competitive, so are you ready to enjoy the benefits of outsourcing?

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This blog is a general summary. It should not replace professional advice tailored to your specific circumstance.

A concept image of a happy businessman

Small Business: Delivering excellent customer service

Customer service is a skill which all of us can learn and improve upon.

A concept image of a happy businessman

It is said that the main reason for customer churn is not price, but bad customer service. Many unhappy customers simply don’t return, especially in today’s world where there are plenty of alternatives and choices available. On the other hand, happy customers can help your business grow, as they tend to purchase more and refer others through valuable word-of-mouth referrals.

At Tax Agility, we are small business accountants in London and we help other small businesses to grow through exceptional accounting services. If you have worked with us, you know that we diligently take care of the accounting and bookkeeping duties, along with providing solid tax advice and payroll administration, leaving you time to focus on running the business.

We are also keen to share tips that can help small business owners like us. So in this article, we shall take a look at the principles that underpin customer service and discuss how to deliver excellent customer service.

Principles of good customer service

Every business has some ideas on how to provide good customer service. Generally, they centre around:

  • Listening to your customers – finding out what they consider to be good customer service and what they expect from you.
  • Understanding that customer service is a process – it exists in all aspects of your business and every interaction is an opportunity to show your professionalism.
  • Following up with both positive and negative feedback – resolving the issues quickly and amicably, without getting emotional, will win you respect.
  • Being honest – if you don’t understand how a product works or if you can’t troubleshoot, let them know and find another solution for them.
  • Practising empathy – putting yourself in their shoes when addressing their concerns.

Delivering good customer service

After speaking to small business owners who excel at customer service, we are able to categorise the three aspects needed to deliver good customer service. They are commitment from you the business owners, a good understanding of how your customers expect you to meet their needs, and an effective customer service program to help you deliver. When all the three aspects are working cohesively, you will create a virtuous cycle that can yield a string of positive outcomes.

Commitment from you

If you are fully committed to customer service, you will hire like-minded individuals, foster a service culture, empower your staff to take ownership, recognise and reward their work, and provide adequate training. You want happy staff who will go out of their way to give the customers what they want and deliver when they want it, in the best possible way.

Having a positive attitude goes a long way too. Remember to:

  • Smile: Someone said that a smile alone doesn’t guarantee good customer service, but good customer service almost always starts with a smile.
  • Take initiatives: Go up to the customers and ask if they need assistance or suggest complementary products, if you run a brick and mortar business.
  • Be patience: Some customers may require more time to convey what they want or what is wrong with the product purchased. Take time to understand, clarify if needed, and always offer genuine help.
  • Say ‘please’ and ‘thank you’: When you say please, you are showing respect; and when you say thank you, you are showing gratitude. Small business owners who value their customers use ‘please’ and ‘thank you’ regularly.

Know what your customers expect from you

Every customer has a unique perception as to what customer service means to them. The level of service they expect also varies from one provider to another. For example, they may expect a no-frill service from a discount store, but more personalised service from a close-contact provider like a hairdresser, a sports therapist and a tailor. If you don’t yet know what your customers want from you (and your business), it is time to start talking to them and gathering feedback.

Creating a customer service program

An effective customer service program should contain three things – it should define the level of customers service your business wants to provide at every interaction, describe the necessary steps to achieve it, and methods to sustain the program.

Here are a few examples:

  • Your business receives a fair amount of calls and you want your staff to answer them within the first three rings, use a greeting message, and remain professional throughout.
  • You want your staff to take the initiative and suggest complementary products to customers – like a pack of rechargeable batteries to go with an electronic gadget.
  • Your business may receive a bad review on social media from time to time. When it happens, your staff will contact the unhappy customer quickly (hopefully within the same business day). The process will see them investigate the issue, acknowledge when there is a mistake, and seek to resolve the issue with the customer amicably.

Don’t forget your staff

As a small business owner, you know the importance of hiring and retaining staff who are as committed as you. So it makes sense to invest in training and equip them with the appropriate skills and knowledge to help you meet your business goals.

It is equally important to recognise and reward staff who put in the hard work. Some recognition could be spontaneous – whenever you see them do a good job, thank them personally. On the other hand, planned recognition could involve a monetary or non-cash incentive when they reach certain targets, or when they consistently offer a high level of service to your customers.

Data protection and your business

If your business collects and stores customer information, you must understand the legal requirements regarding what you can do with the information. The data protection rules state that you must make sure the information is kept secure, accurate and up-to-date. When you collect their personal data, you must also tell them who you are and how you will use their information (and if you intend to share the information with another organisation). You must also inform them that they have a right to:

  • See any information you hold about them and correct if it is wrong
  • Request to have their data deleted
  • Request their data is not used for certain purposes

Good customer service will help you grow

Your happy customers will undoubtedly come back to buy more and recommend others to you through word of mouth referrals. They can generate more sales for you, which in turn will feed a positive loop and produce more favourable results.

At Tax Agility, we know the importance of good customer service because most of our clients come through referrals, from other small business owners who are very happy with our accounting, bookkeeping, tax and payroll services. If you are a new client, you will know that our approach is to understand you first – including your business objectives and financial circumstances – only then we can suggest how to assist you.

You also have the freedom to choose the level of engagement you want from us – for instance, you may need us to manage bookkeeping for now, give you tax advice when you need money to invest, add payroll when your team expands, and use our management consultancy service when you are ready to grow. All of our services are competitively priced with no hidden charges, and our small business accountants are always here to assist.

Call us today on 020 8108 0090.

Alternatively, you can use the contact us form to get in touch.

Our services:

  • Accounting & Bookkeeping: leave your day-to-day finances to us. We will also provide monthly management accounts, prepare statements and help you set-up cloud accounting.
  • Tax: if you are tax-efficient, you will have more money to invest, expand and create jobs in your community. Let us help you with tax planning, tax computation and tax returns.
  • VAT: from VAT returns to manging VAT on import and export goods, we take care of them so you don’t have to.
  • Payroll: as your team grows, outsource your payroll administration to us so that you and your team can continue to enjoy accurate and on-time payslips every month.
  • Management consultancy: take your business forward with practical advice based on financial data and benchmark analysis.


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This blog is a general summary. It should not replace professional advice tailored to your specific circumstance.

A concept image of business that is closed due to COVID-19

An update on COVID-19 support available to small businesses

A concept image of business that is closed due to COVID-19

As the daily number of people tested positive for COVID-19 continues to rise across England, many businesses and self-employed individuals are bracing for tighter restrictions.

(Updated on 7 November 2020)

On Friday (30 October), as the Furlough Scheme was coming to an end, we wrote this blog to talk about the Job Support Scheme (JSS) and other measures. But a day later, Prime Minister Johnson announced the second lockdown in an attempt to slow down the spread of Coronavirus. Accordingly, we have updated this post to reflect the latest support available to small business owners.

The Furlough Scheme is extended

Introduced in March, the Furlough Scheme (also known as the Coronavirus Job Retention Scheme or CJRS) was supposed to end on 31 October 2020, but as the second lockdown is set to begin on 5 November 2020, the scheme will be extended until March 2021. Essentially, it allows you to furlough your staff full-time, or ask them to work on a part-time basis and furlough them for the rest of their usual working hours. You will have to cover their wages for the hours worked, as well as National Insurance and employer pension contributions. You will be able to claim either shortly before, during or after running your payroll.

Employees who are being furloughed will receive 80% of the current salary for hours not worked, up to a maximum of £2,500 per month. All of the 80% is fully funded by the government – this is in contrast to how the scheme was administered previously. Before November, the scheme required affected employers to pay 20% and the government paid 60% to make up 80% of the salary.

Employee eligibility: You can claim for employees who were on your PAYE payroll on 30 October 2020. You must have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee. If employees were on your payroll on 23 September 2020 (i.e. notified to HMRC on an RTI submission on or before 23 September) and were made redundant or stopped working for you afterwards, they can also qualify for the scheme if you re-employ them. Neither you nor your employee needs to have previously used the Furlough Scheme.

For employers, the first task is to check if your employees are eligible for the scheme, based on the information above. Then talk to your employees so they know if they are being furloughed fully or part-time, and agree working hours if applicable. Keep the records that support the amount of the furlough grant you claim, in case HMRC needs to check it. You can view, print or download copies of your previously submitted claims by logging onto your CJRS service on GOV.UK

Other forms of support

Before the announcement of the second lockdown, local councils have different levels of support to help businesses based on the COVID alert level of the area. But as the second lockdown is affecting the whole of England, the government has announced the followings:

  • If your premises is forced to closed, you will get £1,334 per month (for properties with a rateable value of £15k or under), £2,000 per month (for properties with a rateable value of £15k to £51k), and £3,000 per month (for properties with a rateable value of more than £51k).
  • £1,000 for every furloughed employee kept on until at least the end of January.
  • £1,500 for every out-of-work 16-24 year-old given a "high quality" six-month work placement.
  • £2,000 for every under-25 apprentice taken on until the end of January, or £1,500 for over-25s.

Job Support Scheme (JSS)

The Job Support Scheme (JSS) aims to help employers retain their employees if they are struggling or when they are required to close. The JSS, which was scheduled to come in on 1 November, has now been postponed.

Professional services grant

In July 2020, the government announced £20 million in new grants to help small and medium-sized businesses recover from the effects of this pandemic. The scheme will offer grants between £1,000 to £5,000 to these businesses, helping them purchase new technology and equipment, as well as paying for professional services (legal, financial, HR and other qualified services).

The schemed is administered through the Local Enterprise Partnership (LEP) and each LEP has a minimum of £250,000 to get the program going.

For businesses in London, you can access the businesshub.London page for more information.

Deferral of VAT

Back in March, the government announced that VAT-registered companies could opt-in to defer their VAT payments (between 20 March 2020 to 30 June 2020) and pay them by 31 March 2021. This scheme is now closed, but those who have opted-in have the option in pay in smaller payments until 31 March 2022 instead, a much longer period than previously announced.

Self-Employment Income Support Scheme (SEISS)

Introduced in March 2020, the SEISS allows self-employed individuals whose businesses had been adversely affected by the pandemic to claim a taxable grant. To be eligible, you must have:

  • Traded in the tax year 2018 to 2019 and submitted your Self Assessment tax return on or before 23 April 2020 for that year
  • Traded in the tax year 2019 to 2020
  • The intention to continue to trade in the tax year 2020 to 2021
  • Trading profits less than £50,000 and at least equal to your non-trading income (if you are not eligible based on the 2018 to 2019 Self Assessment tax return, HMRC will look at the previous tax years)

The first SEISS grant ended on 13 July 2020 and the second grant ended on 19 October 2020. On 5 November 2020, the chancellor Rishi Sunak confirmed that a third grant – and a more generous one – will be made available to help self-employed individuals. The third grant will cover 80% of profits for November, December and January, up to a total limit of £7,500. Applications will be open from 30 November 2020. Details for the fourth grant, covering three months from February 2021 to April 2021, will be announced later.

Deferral of second payment on account

Self-employed individuals are aware of the two payments on account taking place each year, with the first one due on 31 January during the tax year and the second one on 31 July following the end of the tax year. The second payment on account for the 2019/20 tax year was supposedly due by 31 July 2020, but taxpayers with up to £30,000 of Self Assessment liabilities could defer the second payment (due July 2020) to 31 January 2021. In September 2020, the government further announced that you could pay instalments (by entering into a Time to Pay arrangement) if you couldn’t pay in full by 31 January 2021 – this means you could stretch the final payment to January 2022.

Other things to be aware of

Before the announcement of the second lockdown, the government had already encouraged companies to allow employees to work from home if they can carry out their normal duties without going to the office. Now people are told to stay at home, except for education, work (if cannot be done at home), exercise, medical reasons, shopping for food and essential items, or to care for others.

If an employee must self-isolate (either they have tested positive or been in contact with someone who has tested positive), the business owner must not knowingly allow the employee to come into the office or attend meetings elsewhere. Violating this provision is an offence with fines starting at £1,000 for the first offence, rising to £10,000 for the fourth and subsequent offences.

Be careful of COVID-19 scams

The pandemic has already affected millions of people across the UK, yet scammers are still actively targeting small business owners, their employees, as well as self-employed individuals. Apart from criminals pretending to be government agencies ‘phishing’ for information, some of us have also received emails from supposedly company server informing us of unread messages – but taking us to a phishing site instead.

Members of the public have also seen texts informing them of tax rebate from ‘HMRC’ and encountered fraudulent products, anything from hand sanitisers to COVID-19 swabbing kits. Remain vigilant is key, and report the scams to Action Fraud (0300 123 2040 or online).

The information contained in this newsletter is of a general nature and no assurance of accuracy can be given. It is not a substitute for specific professional advice in your own circumstances. No action should be taken without consulting the detailed legislation or seeking professional advice. Therefore, no responsibility for loss occasioned by any person acting or refraining from action as a consequence of the material can be accepted by the authors or the firm.

Shopfront concept

Sole Trader or Limited Company: Choosing one that best suits your business needs

Shopfront concept

When you are ready to launch your business, one of the first key decisions is choosing a business structure that suits you best.

Choosing to run your business as a sole proprietorship or as a limited company depends largely on the type of business you run, how you want to run it, and your aspirations when it comes to growing your business.

The business structure that you choose can determine:

  • How much tax you pay
  • If you are considered the owner of the business or an employee
  • How far you want to protect your personal liability
  • How much control you want to have over the business
  • How much you want to pay to maintain the company
  • How much administrative work you want to do it yourself

It is worth mentioning that you can change your business structure at some point through your business journey. For instance, you may choose to start with sole proprietorship but as your business expands, you take on staff and forge new partnerships. These new commitments may make a limited company more suitable to your business needs and you make the switch accordingly.

Having said that, getting the business structure right from the start can potentially save you time, money and effort. If there are concerns you would like to address, contact one of our small business accountants today and we’d be happy to discuss any issues surrounding sole proprietorship or limited company.

Sole trader

Being a sole trader or setting up a sole proprietorship is the simplest and also the most popular business structure in the UK, but it comes with a big catch – you are legally responsible for all aspects of the business including its finances. The statement seems alright at first glance, but it is the implications that you should pay your attention to. What it means is that you are personally liable for all the income your sole proprietorship receives as well as all the losses your business incurs, which can put your personal assets at risk when things go bad.

Here is a quick example
Your business goes through a bit of a rough patch and the business owes suppliers a sum of money. Because your business is essentially you (there is no separation in the eyes of the law), your creditors (in this case your suppliers) can file for County Court Judgements against you, putting both your business and your personal assets (property, money, possessions) at risk.

So let’s look at the advantages, disadvantages and tax responsibilities of a sole trader:

Advantages of a sole trader

  • Easy to set-up
  • Small administrative burden
  • Small up-keep cost
  • You have complete control on how the business is ran (as there aren’t any other shareholders)
  • You have privacy – your name is not published on the Companies House website
  • In most instances, you have less accounting work than a limited company too
  • As there is no separation between your sole proprietorship and you, you can access the profit anytime you like

Disadvantages of a sole trader

  • You have unlimited liability, meaning if something goes bad, your personal assets (property, money and possessions) are at risk
  • As liability is an issue, some businesses are less reluctant to deal with a sole trader
  • Because you are personally liable for all the income your business generates, you may be paying a lot of tax as a sole trader when your business booms
  • You cannot split your business profits or losses with family members
  • Rightly or wrongly, business people tend to view sole proprietorship as something less serious

Tax responsibilities of a sole trader

  • You must keep all financial records (income and expenses) for at least five years
  • You must send a Self Assessment tax return to HMRC every year
  • You pay Income Tax and National Insurance
  • If you are VAT-registered, you must file a VAT return

Limited company

Before launching your business, your friends and business associates are likely to encourage you to set-up a limited company due to its distinct advantages. So let us go straight into highlighting the advantages, disadvantages and tax responsibilities of a limited company.

Advantages of a limited company

  • The biggest advantage is that your liability as a shareholder is limited
  • You can reduce your tax obligations legitimately by taking a low salary and using dividends (which is taxed at a lower rate) to make up your income
  • You can also split your business profits or losses with family members
  • You can transfer ownership by selling shares to another party
  • The business structure is respected
  • A limited company tends to have wider access to capital and funding than a sole proprietorship
  • The name of your company is protected; no one else can use the same name as your company once you have registered
  • Your company can contribute pre-tax income to your pensions
  • Your company may qualify for some types of relief

Disadvantages of a limited company

  • The set-up cost is higher than a sole proprietorship
  • The running costs are also higher than a sole proprietorship
  • Your limited company is owned by shareholders and managed by directors – you have full control only if you are the only shareholder and director
  • As a director and/or significant owner, your name is published on the Companies House website
  • The financial information of the company is also published on Companies House
  • If you fail to meet your legal obligations, you may be held liable for the company’s debt
  • Even if you hire an accountant to manage your day-to-day tasks, you are still legally responsible for your company’s records, accounts and performance.

Tax responsibilities of a limited company

  • A limited company must keep good financial records and report changes
  • A limited company must complete corporation tax return and pay corporation tax on its profits
  • A confirmation statement and annual accounts must be sent to Companies House each year
  • File a VAT return if the company is VAT-registered

Reducing your tax obligations through a limited company

In the article Incorporating a limited company, we share two scenarios on how a director of a limited company can reduce their tax obligations and increase their tax-home pay by spreading the income between salaries and dividends. If you are interested to know more, follow the link and have a read.

Sole Trader or Limited Company – need help deciding?

Making the decision to launch your own business is the first step that you take towards fulfilling your dreams; now this step of choosing a business structure that suits you will reinforce your commitment.

At Tax Agility, our small business accountants have helped countless entrepreneurs set up their limited companies over the years. Moreover, we continue to support them throughout their business journey, assisting with company accounts, payroll and tax matters. In some instances, we even help to implement financial disciplines that are unique to your business, reigning in the appropriate level of financial control so your company can grow and expand quickly but sensibly.

If you would like to talk to one of our small business accountants regarding your accounting needs (for either your sole proprietorship or limited company), give us a call on 020 8108 0090 or fill in our online form.


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This blog is a general summary. It should not replace professional advice tailored to your specific circumstance.

The complete guide to buying a franchise

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Franchising has helped hundreds of thousands of individuals becoming small business owners in the UK, but is it suitable for you?

Owning your business through franchising can be hugely rewarding, as it uses a business model that has been proven successful, so much so that fewer than 1% of franchisees fail, according to a comprehensive 2018 study done by BFA and NatWest. In comparison, it is estimated that 60% of new businesses will fail within three years according to this 2019 article by the Telegraph.

As a franchisee, you pay fees to a franchisor who is usually an established company that licenses its brand, process and know-how to you. Essentially a franchisee is a person who is a self-employed business owner but with limited control on how you can run the franchise; you must follow the strict procedures laid out by the franchisor whom you choose to work with.

Although popular, franchising isn’t for everyone. In this article, our small business accountants at Tax Agility aim to discuss the top five points you need to know about franchising:

  • Types of franchises
  • Advantages of running a franchise
  • Disadvantages of running a franchise
  • Key considerations
  • The importance of due diligence

Hopefully at the end of the article, you would have a better idea if franchising is something that you would like to pursue or not.

Types of franchises

Every franchise is slightly different in how they are managed and generally they can be broken down into three main types.

1. Business format

This is the most common type and is widely used by fast-food companies. What it means is that you buy the right to use the franchisor’s intellectual property, systems and products for a fee over a set period of time as specified in the contract.

Under this arrangement, it is common for the franchisor to continually influence the franchisee by setting guidelines and goals, as well as offering training and support.

2. Product distribution

In this case, you (the franchisee) is given the right to distribute a manufacturer’s products within a specific territory or at a specific location. Your business may not trade under the franchisor’s name but you may choose to display the manufacturer’s brand prominently in your business premises. An example is a car dealership where you sell the franchisor’s products directly to the public.

3. Processing or manufacturing

In this model, you (the franchisee) produce or manufacture the products, following the exact formula or know-how given by the franchisor. For instance, a chocolate maker licences its recipes and packaging to franchisees.

In addition to the above, there are also other types of franchise arrangements like agency, license and management.

The top five advantages of running a franchise

1. An established brand

Your franchisor is well established and ready to let you use their brand, reputation, as well as products or services.

2. A support network

Your franchisor is likely to have an extensive business network with incredible power to assist you with lease negotiation, shop fit-out, equipment, management training and ongoing support. Some franchisors go even further to provide legal and logistical support to their franchisees.

3. No experience required

Quite a few franchisors are not dissuaded if their potential franchisees have zero business experience as they offer training and give tools to help their franchisees succeed. Instead of experience, some franchisors may look for franchisees with leadership skills, passionate about the business and a willingness to learn.

4. Less concern over market trends

When running your own business, you need to continuously develop products or services that are relevant to your customers, otherwise you risk losing them. When you are a franchisee, you tend to worry less about market trends as usually your franchisor takes on this responsibility.

5. Almost guaranteed success

The success of franchises is supported by data. In the 2018 franchise landscape study done by BFA and NatWest, there were about 48,600 franchised units in the UK with 6 in 10 of them enjoyed a turnover of more than £250,000. Among them, 93% of franchisees claimed profitability in 2018. The data show that as long as there are proper due diligence, good management and good support in place, there is not a lot to hold a franchise back from becoming profitable.

The top five disadvantages of running a franchise

1. It is costly

For all the success that franchising can offer, it is often forgotten that the initial start-up costs to gain access to a franchise can be very high. It is not unusual to see a franchisor wanting at least £50,000 from a franchisee and often hitting six figures for a fast-food chain.

On top of that, you also need to secure a location, get equipment, buy stock, employ staff and get the business going. While some supplies will be provided by the franchisor, there are bits and pieces that you need to make your own purchases. Additionally, you will need to pay a regular fee to the franchisor irrespective of whether you turn a profit or not.

2. Your control can be limited

Your franchisor has given you the platform to succeed, but no matter how successful or profitable you make your franchise, the franchisor remains in control and shares your success. The only growth path for you is to license more franchises from your franchisor.

You also have less autonomy when it comes to making business decisions, as you are usually required to operate the franchise according to a standard operating manual.

Also, when you decide to sell your franchise, you have strict procedures to follow. Some franchisors also want to approve your buyer first. In other words, you have less control in a franchise than in managing your own business.

3. Your ideas (and franchises) are never your own

Jim Delligatti became a McDonald’s franchisee in 1955 and thought up the concept for the Big Mac 10 years later. Despite the global success of this iconic burger, Delligatti never received any royalties for his creation but a plaque.

Being a franchisee may mean that you are self-employed, but unlike running your own company, you do not have the creative freedom in a franchise. So if you are someone who loves the freedom to innovate, generate ideas and think outside of the box, franchising may not be right for you.

4. Bad performances by other franchisees may affect your franchise

When something bad happens in another franchisee like when they don’t follow strict hygiene procedures and customers get sick, it tends to affect other franchisees and you have no control over it.

5. Franchisors can refuse to renew your contract

When it comes to getting a franchise contract renewed when the previous contract is up, a franchisor may not elect to renew your contact irrespective of how hard you work or how successful you are.

Franchisors can choose not to renew for a number of reasons, such as if they think you are not performing as well as they want or if there has been non-payment of fees. In fact, any minor breach of the agreement could result in the franchisor pulling out the rug from under you. When this happens, the business and its goodwill go back to the franchisor.

Key considerations

Apart from the main advantages and disadvantages of owning a franchise mentioned above, there are other areas which you need to consider as well.

1. Do your research

In London, there are at least a few hundred franchising opportunities available at any one time so take your time to research. Beware that some franchisors may inflate earning potential claims.

2. Look at hard data

To help evaluate your options, ask potential franchisors for specific data including financial information (this should include past and projected financial data), information on previous and current franchisees, disclaimers, as well as market reputation.

3. Ask other franchisees

Good questions to ask include:

  • How long did it take them to recover their investment?
  • What is their profit margin?
  • What are the hidden and unexpected costs?

It may worth getting an independent accountant to look at the numbers before you make a commitment.

4. Match your desire

Running a franchise means you must adhere to strict procedures, even if you do not agree with them. If you are after creative freedom to carve your own success story, then franchising may not suit you.

5. Match your personality

With so many opportunities available, find one that best fits your personality. For instance, if you are ecologically-minded, choose a franchise that promotes green energy, environmentally-friendly cleaning products, or a natural make-up range, to name but a few.

6. Work out your finances

Buying a franchise requires a substantial fee upfront, anything from the license fee to vehicle cost and/or premises rent. Work out how much money you need and how you are going to raise the fund.

Addressing all the points above should help you to decide whether or not franchising is suitable for you. At the end of the exercise, you may realise that instead of becoming a franchisee, you actually want to go into a business by yourself or with a partner. You may even be thinking of buying an already established small business, which may be less costly than buying a franchise while affording you the freedom to change the business as you see fit. If this is on the cards, this article The complete guide to buying a small business may be useful.

The importance of due diligence

Due diligence refers to the process in which you investigate, verify and confirm the claims made by the other party before entering into a contract with them.

Before making a large investment (in this case buying a franchise), you need to conduct due diligence by verifying the franchisor’s business practice, financial performances and even statutory obligations. The objective is to mitigate risks and avoid any unforeseen liabilities.

Good due diligence often starts with financial data and tax compliance but it quickly extends to include areas like legal, intellectual property, statutory and even environmental due diligence. As you are after sensitive data, some franchisors may ask you to sign a non-disclosure agreement before they can share the information with you; this is a common practice.

While you are likely to rely on your accountant and solicitor to assist with financial and legal due diligence respectively, you can definitely tap into your business acumen and conduct business due diligence accordingly. Some business questions may include:

  • Why has no one set-up a franchise in this particular area previously?
  • What market research can you conduct to determine demand in a local area?
  • How intense is the local competition? Are prices competitive?

Tax Agility is here to support small business owners

Deciding on the best route into business ownership is dependent on a number of factors such as the opportunities in front of you, your skillsets and the budget at your disposal. Whether it is the world of franchising, launching a start-up or buying a pre-existing business, there are advantages and disadvantages inherent with each of these entry points.

Despite some differences, these three pathways share one common hurdle to overcome: finance. Before making any decision on which option you want to pursue, it is important to do your due diligence and get sound financial advice that can help you decide wisely. At Tax Agility, we provide expert consultancy to entrepreneurs across London who are keen to get into business ownership for the first time.

Our chartered accountants for small business owners are here to offer solid advice on all matters relating to accounting and tax. We care very much about your success, which is why our advice is always centred around what is best for you and your business. Think of us as your financial controller but without paying big money. Use our expertise to help you make sure the financial side is strong, so you can focus on running the business.

Our accountancy, tax and payroll services are used by small and medium-sized businesses ranging from start-ups to franchises to established companies. Call us now on 020 8108 0090 to discuss how our small business accountants can help you.


You may also be interested in:

This blog is a general summary. It should not replace professional advice tailored to your specific circumstance.