Ensuring compliance in your first year in business

Starting a new business can be as daunting as it is exciting, especially if it is your first venture. It’s likely that in previous senior job roles you have had exposure to some areas of how the business operates but it’s only when you realise that there is no Finance, HR or IT department to fall back on that all eyes are looking at you for answers. Sometimes you will know the answer, but what about the times when something needs doing that you are not aware of? Those are the times that you can get tripped up and non-compliance often comes with a monetary penalty along with a slapped wrist.

This article will never be able to catch everything because of the breadth of industries and regulations that exist, rather it sets out to provide a list of things to be aware of that are common to most businesses and which may be easy to miss with all the other plates you will be trying to spin at once.

1: Payroll

This is perhaps a predictable place to start, but one which affects every small business with at least one member of staff. We already have a whole article on How and when to register for PAYE so all we will repeat here is that once you have employed your first person, you must register with HMRC for PAYE. Check out that article for an in-depth look at how to do that. In addition to registering for PAYE, remember to enrol your staff in your pension scheme. We also have a helpful article covering How to choose the right Pension Provider.

2: Insurance

Whilst there are some business insurances that you may elect to forgo in the early stages, there are a number of policies that you should strongly consider, and one which is a legal requirement.

Employers’ Liability (EL) Insurance is a legal requirement as soon as you make your first hire and your policy must have at least £5 million of coverage. The policy must also come from an FCA regulated insurer. Failure to hold EL Insurance carries a fine of up to £2,500 per day, and you must also display your EL Insurance certificate in your office, if you have one.

Two other commonly held policies are Professional Indemnity (PI) Insurance and Public Liability (PL) Insurance, and in fact it is often difficult to buy EL Insurance without PI or PL being part of it. PI Insurance covers the cost of compensating clients for loss or damage caused by your business. For some new startups this will not be necessary because the first period of trading might be product development or prototyping but for others it will be wise to buy a policy from day one. PL Insurance protects the public from loss and is important where you have offices or other premises where the general public and / or customers and suppliers may be present. It might also be relevant where, for example, you or an employee are carrying out company duties and inadvertently someone is injured

For many businesses, PL Insurance makes a lot of sense from the get go and if your insurer or broker bundles EL Insurance with one of the others, you would be wise to take it.

3: Companies House

It’s the boring stuff that can really catch you out, especially as a Limited Company which has additional statutory filing requirements vs a sole trader or partnership.

Once you have incorporated your business you have an annual requirement to file a Confirmation Statement, previously called an ‘Annual Return’. This is a simple document stating a few facts about the business such as who holds the shares and where the registered office is located. Companies House send out reminders but it’s one of those jobs that is easy to put off until it is suddenly too late. For the sake of the £13 annual filing fee, it is best to just get it out of the way as soon as the anniversary date passes. Remember to get yourself set up for Web Filing to make the whole process a lot easier.

4: Information Commissioner’s Office (ICO)

Unless you have an exemption, every type of business which processes personal information needs to pay a data protection fee to the ICO. Fees are currently based on a three tier system costing £40, £60 or £2,900 per annum. As of writing, unless your turnover exceeds £36M, or you employ more than 250 staff, you will not be in the top tier so the fee is somewhat trivial and getting fined for non-compliance on this one is pretty much unforgivable.

5: Accounts & Taxation

Depending on your business type (sole trader, limited company etc) you will have different accounts and taxation requirements, but everyone has to do something. This is one area where getting yourself a decent accountant makes a lot of sense and will save you a lot of hassle. Yes, it is one of your bigger admin expenses and it might seem like a waste of money, but try and do some of this yourself or have HMRC knocking at your door and you will quickly change your mind.

Other considerations

A few other things which don’t necessarily require any registrations or annual fees but are nevertheless important include health and safety legislation, money laundering regulations, modern slavery act, accessibility, and diversity, equality and inclusion. As your business grows, so will the amount of things you need to stay across so keeping up with the latest bulletins from the likes of HMRC, the ICO and the Health and Safety Executive will ensure you remain compliant. It’s better to over-assess and over-document if you are not sure – no-one ever got in trouble for being too careful after all.Sign up with a pension scheme provider.