Regulators update regulations and legal requirements constantly, and it can be difficult for SMEs to keep up. Ensure your Small business compliance UK with all rules and regulations by focusing on the following compliance areas.
How does compliance affect small businesses?
Compliance refers to ensuring that companies of all sizes and their employees adhere to national and international laws. In the United Kingdom, company law is primarily governed by the Companies Act 2006.
A major objective of compliance is to avoid or identify criminal behavior as soon as possible and take appropriate action. Even though it may seem daunting to make sure every aspect of your Small business compliance UK is being run legally, it’s worth the effort if you’re running one or starting a small business. The purpose of compliance regulations is to protect you, your business, your employees, and your property.
A compliance program must also follow ethical guidelines as well as meet legal requirements. A company that is compliant demonstrates that it respects the interests of its stakeholders – including customers, employees, and residents (for example, if it is a factory) – by operating responsibly. It can have a positive impact on the credibility and reputation of your Small business compliance UK.
Which are the most important areas of business compliance to consider?
Some of the most important compliance considerations when setting up a company include:
- Following regulatory requirements set out by professional regulators, such as the Financial Conduct Authority, the Office of Rail and Road, the Law Society, or the Environment Agency
- The compliance with finance regulations – such as those relating to tax, payroll, HMRC, accounting, record keeping, Companies House, and anti-money laundering.
- Regulations on employee rights and employment law
- Safety for your employees and visitors
- Regulations on data protection and privacy
- Third-party contracts and agreements
- Industry-specific permits, licenses, permissions
Maintaining GDPR compliance
To provide consumers with a greater level of protection, the EU’s General Data Protection Regulation (GDPR) of 2018 rules how companies process and use personal data. Every aspect of your business will be affected by GDPR, from your customer database to the way you market your products and services. In the event of non-compliance, employers can be fined up to €20 million (about £18 million) or 4% of their annual global revenue, whichever is greater. Some exceptions apply to companies with under 250 employees.
The GDPR has been incorporated into UK data protection law as the UK GDPR since Brexit. In its data protection principles and obligations, the new iteration of GDPR, which came into effect on 1 January 2021, is most similar to the previous one. GDPR requires that any organization that handles personal data be able to:
- Provide evidence that consent was given to hold it
- Explain how it will be used
- Make sure it is protected
- Give individuals access to and the ability to review, amend, and challenge data processing practices
Is my small business required to have legal documents?
If you want to ensure your Small business compliance UK, you should regularly review and update all the legal documentation, including agreements, contracts, forms, letters, policies, and procedures. All areas of employment and Small business compliance UK law, as well as taxes and health and safety, are covered by this. You will need to provide the following documentation as an employer:
It ensures that each employee is protected by specified employment terms, which is a legal requirement and serves as evidence that you have the right policies in place:
- Contracts of employment (written statements of employment)
- Discipline and grievance procedures
Documentation that registers your business relates to tenancy and financial arrangements or protects your Small business compliance UK, products, and services:
- Information about Companies House
- Records for HMRC
- Privacy policies
- Related to tenancy agreements
- Financial agreement details
- Goods and services contracts
- And intellectual property
Information that is provided for tax purposes should be retained:
- Statements of bank accounts
- Expense records
- Previous tax returns
Safety: Ensure that risk assessments are completed regularly and that you have procedures in place to log incidents:
- Post a poster about health and safety regulations
- Document accidents and incidents
- Conduct risk assessments (in writing if you have five or more employees)
- Make a health and safety policy (in writing if you have more than five employees)
In what ways is poor business compliance risky?
The risk of poor business compliance is simply not worth it. To make sure your company is operating in compliance with regulations, you need to have proper internal controls in place.
In the event your company is investigated and found to be non-compliant, sanctions such as fines, profit skimming, or even imprisonment could be imposed.
Additional costs and consequences may arise, such as claims for damages from customers and business partners. Furthermore, these sanctions can affect the parent company as a whole and not just a single company. A business insurance policy cannot protect you in these circumstances. Also to consider is the loss of reputation and trust among business partners and customers, which may be difficult to regain.
What is the best way to keep my business compliant?
Regulations are ever-changing, and new rules and updates are put into place constantly – and keeping up with them is a major challenge for Small business compliance UK, but it’s important.
As an example, there was a recent change in tax avoidance legislation. Private-sector employers must follow the same rules as public sector employers concerning IR35 – also known as ‘off-payroll working rules’ – starting in April 2021. Employers in the private sector must now choose between treating contractors as contractors and risking a hefty fine if HMRC takes a different view or treating them as employees with all the associated costs and responsibilities. Contractors and businesses can ensure they do not fall foul of IR35 by taking the appropriate steps.
As a safeguard against non-compliance, adopt internal controls such as appropriate policies and procedures, regular risk assessments, internal audits, and independent statutory audits, keeping all the associated documentation as proof.