Expert advice on the business of running a garment decoration company
HSBC lends to small business and HMRC goes fishing for small fry
- HSBC launched a £10 billion lending fund for UK SMEs in April as well as 18 months’ free banking for start-ups and 12 months’ for those switching to the bank.
- HMRC raised an extra £489 million through corporation tax enquiries into SMEs, reports chartered accountants UHY Hacker Young. Partner Roy Maugham said: “HMRC appears to be aggressively going after small businesses as ‘easy pickings’ and it’s possible they will look to accelerate investigations next year and beyond to further close the gap, rather than going after big enterprise.
Preparing for your annual accounts
Yen-pei Chen, ACCA’s corporate reporting and tax manager, advises readers how best to prepare their annual accounts
Your annual accounts are not just necessary for the taxman, but well-prepared accounts are an excellent way to impress your bank, other potential investors, and existing and new clients.
Be organised throughout the year:
- Keep track of sales and purchases: cross-referencing, for example, by recording invoice numbers on your documents from the sales or purchase order through to the bank payment allows you to leave a trail that can be traced right through the records
- Take control of stocktakes: set out stock-taking procedures in writing, lay out stock in a logical way and label them, print lists of different types of stock on hand, and ensure no stock comes in on the day of the stocktake
- Keep a register of all the fixed assets that the business owns: An asset register makes completing your annual insurance form easy, as you can attach the list of assets
- Check that your payroll team have done the calculations correctly. The business is liable for incorrectly deducted tax and National Insurance, not the employee
Plan ahead and think of the big picture:
- Think what information would help you to run your business. Could you classify your income, expenses, assets and liabilities in a way that helps you to budget and measure performance more accurately?
- Can you improve credit control? What payment targets should you aim for? How can you reduce exposure to bad debts?
Talk to your accountant:
- Which is the best software for your needs: does the bookkeeping system record VAT quickly and easily? Is there a better way to record income and expenditure?
- Are there any tax planning steps you should take before year end? For example, bringing forward certain planned purchases so that they count in the current accounting period can help to maximise tax deductions
- Find out well before the year end what other information and explanations they will need
- Have a feedback meeting after the year-end process can produce good ideas and advice on how business practices can be improved
ACCA is a leading global body for professional accountants. Visit the ACCA website to find a professionally approved accountant and for more advice, including information from ACCA’s Professional Insights team.
I’ve been asked to print T-shirts for a well-known retail shop, but I think the slogan could be deemed offensive. I really don’t feel comfortable carrying out the order in case there is a media backlash and my company gets caught up in it – can I turn down the order or will they be able to insist that I fulfil my side of the contract (it’s a regular client)?
There have been lots of press stories recently regarding this very issue. Last month, retailer Forever 21 came under fierce criticism for selling a men’s T-shirt with the slogan “Don’t say maybe if you want to say no”. After much public outrage, Forever 21 withdrew the item and issued a statement of apology.
Similarly, high street store Zara angered many people who suffer with celiac disease with its cropped white T-shirt displaying the slogan “Are you gluten free?”. Over 50,000 signatures via change.org resulted in the company withdrawing the item from sale and apologising for trivialising the disease.
In such circumstances, it is usually the retailer who comes under fire but a manufacturer who knowingly produces offensive material could also find themselves exposed to negative press attention.
Whether your company is able to refuse the order will depend to a large extent on the terms of the contract between you and the retailer. A well drafted contract would always include provision for the manufacturer to refuse to produce items that could be considered inflammatory or offensive. If there is no such ‘get out’ clause in your contract, you should consider re-negotiating the contract with the retailer as soon as possible so that this problem can be avoided in the future.
It is unlikely that the retailer would be able to force you to complete the order. It may apply to the court for a specific performance order compelling you to perform the contract. Specific performance is ordered only on equitable grounds in view of all the conditions surrounding the particular case. The determining factor is whether, in equity and good conscience, the court should specifically enforce the contract because the legal remedy of monetary damages would inadequately compensate the retailer for its loss. Ordinarily, the court will not order specific performance in cases where financial compensation is more readily ascertainable and recoverable.
Furthermore, a party may only obtain an order for specific performance if it has acted in good faith, the doctrine of ‘clean hands’. It is arguable that an order for T-shirts carrying an offensive slogan might breach this principle.
Although the retailer cannot force you to make the T-shirts, you may still be at risk of a claim. If the retailer can demonstrate that it has suffered a financial loss as a result of your refusal to fulfil the order, it may bring a claim against you for breach of contract and it would be a matter for the court to decide whether you ought to compensate the retailer for its losses.
In summary, you should check whether your contract provides for you to refuse the order and, if not, weigh up the risk of negative publicity if you produce the T-shirts against the likelihood of a claim for breach of contract and what that might cost you.
Gail Waller is a trainee solicitor at Mayo Wynne Baxter, which provides comprehensive and personal service to a broad spectrum of local, national and international clients.