Tuesday, December 18, 2012

When is a saving ultimately a cost?

The latest press release from BIS makes interesting reading because it gives a good insight into how the Coalition is progressing and going about its idea of making small businesses more 'efficient' through the reduction of what is perceived as red-tape.

It has to be said though that as with a lot of 'traditional' Conservative ideas on what constitutes small government a lot of what lurks beneath the surface could lead to exploitation, whether its the removal of minimum wage legislation (thankfully defeated last time it raised its head in the Commons) or moves to reduce a lot of health and safety requirements. Some of the proposals are nothing more than common sense whilst others would be regarded as sinister if proposed by a party with any great ceremony.

What I always find interesting is the level of smoke and mirrors that often accompany what I do believe are genuine attempts to reduce so called red tape or costs to small businesses. A classic example of this came a few years ago when the Flat Rate VAT scheme was introduced, under the legislation businesses cannot reclaim Input VAT (that's VAT on expenditure) but they only account for Output VAT (that's VAT on the sales they make) at a reduced rate, even though they charge their customers the full VAT rate. This was announced as something that would save all qualifying businesses both time and money, which it did up to a point. What the initial press releases didn't explain was that you would be taxed on the difference between the VAT at the full and reduced rates, something that has annoyed quite a few people.

In the latest BIS release there is a paragraph that proudly trumpets that "changes to modernise and simplify the registration of company charges, saving £21.9 million."  This is a figure that almost certainly cannot be quantified, despite the publication claiming that it has been independently reviewed. It costs £13 per document to register a charge at Companies House (such as a mortgage) but nobody can make claims about future savings based on historical costs if you don't know how many businesses are going to be required to register a charge on their assets. How can you? It is based on the assumption that history will repeat itself exactly.

There is some good stuff in there among the links and documents, quite a bit of it open to public debate and comment, the areas dealing with EU legislation and implementation would I think get more exposure if there weren't such deep rooted fissures within the Conservative party over Europe. The legislation titled   ‘One-in, One-out’ , ‘One-in, Two-Out’ is aiming to deal with all those areas which UK businesses have felt at a disadvantage, although in many cases it seems to have been a question of the UK imposing legislation that other EU businesses have waited to have imposed on them via inspection - that of course is the 'British way'.

What is either a great piece of P.R or a spectacular own goal is the red tape challenge. The aim of this is very straightforward, the addressing of some 6,000 regulations relating to various business sectors. My own interest being the section on company law . One of the key areas of frustration for small businesses is that despite many pledges from Governments over the years, including the long awaited Companies Act 2006 that was supposed to simplify matters but instead seems to have muddied the water, small companies are still essentially treated as large companies but with fewer employers. This is even an area where companies and many of their advisors paths go their own way. When the ICAEW (our governing body) questioned its members last year many wanted more legislation not less, this wasn't a fee chasing exercise but simply a recogniton of the fact that lenders have reverted to the ways so prevalent in the recessions of the 80's and 90's with respect to their reporting demands. The other side of the story of course is that owner managed businesses with no external borrowing really should be exempt from a lot of legislation that has its origins across the Atlantic.

There is plenty of meat in this consultation document to get your teeth into, veggies can choose an appropriate vegetable for their analogy of choice, and I hope that people with a vested interest will take time to add their comments to those already posted. David Cameron has promised that the current Government will listen and this approach at least shows he is as good as his word, whether or not he chooses to hear those points he disagrees with is something only he will know.


Span Ows said...

Interesting stuff, I haven't dug too deep into the red tape challenge yet but there are many 'good news' stories; I'm half convinced that the Coalition are being naif 'on purpose' letting the media and opposition have afield day only to 'turn on the taps' of good news for a 2yr/18mth onslaught in the run-up to the next general election.

Paul said...

The red tape challenge is a good idea and I've added my opinions in one section supporting what the coalition have done.

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