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Cool Ventures Newsletter
Issue Number 16

Pensions Auto Enrollment
Start-up Loans expansion
eCommerce issues
Minimum Wage and Internship crackdown
National Insurance savings for small firms
Data Protection reform
HMRC Phishing Scam

Pensions Auto Enrolment

According to research from the Centre for Economics and Business Research (CEBR) new pension rules will cost small businesses £8,900 each.

Auto enrolment is a looming issue for small businesses. Although widely welcomed as an important way to encourage employees to save for retirement, the new pensions system confers potentially onerous new requirements on business owners. So what is auto enrolment, and how can you meet the requirements with the minimum expenditure?

What is auto-enrolment?

As a result of a new law, employees must be enrolled in a workplace pension scheme if they are aged between 22 and the state pension age, earn more than £9,440 a year, and work in the UK. Employers must also make contributions for qualifying workers. The government will provide tax relief on contributions.

Employees between the age of 16 and 74 and earning between £5,668 and £9,440 a year have the right to opt in to the pension scheme, while those aged between 16 and 74 but earning less than £5,668 have the right to join. You do not need to follow the automatic enrolment process for employees in the latter group who decide to join.

What is the deadline?

The deadline by which you must fulfil your responsibilities under auto enrolment depends on the size of your business. These are known as staging dates. The deadline has already passed for the largest employers.

You can find out your relevant staging date by using the interactive tool on the Pensions Regulator website. Firms with fewer than 30 employees will have to comply by dates between 1 November 2015 and 1 April 2017. The exact date will depend on the final two characters in your PAYE reference. Businesses without a PAYE scheme will have to comply by 1 April 2017.

What do I need to do?

The new rules confer several key responsibilities on all employers. You must:

• Provide a qualifying workplace pension scheme
• Register with and provide details of the scheme to the Pensions Regulator
• Automatically enrol all qualifying workers into the scheme
• Make contributions into the scheme for all qualifying workers
• Provide relevant information to all qualifying workers

How can I make auto-enrolment affordable?

It is important to understand that you will be required to make minimum contributions for all eligible workers. These will be phased in, gradually increasing until October 2018.

• From October 2012 to September 2017 minimum contributions of 2 per cent must be made, of which you must contribute at least 1 per cent
• From October 2017 to September 2018 minimum contributions of 5 per cent must be made, of which you must contribute at least 2 per cent
• From October 2018 minimum contributions of 8 per cent must be made, of which you must contribute at least 3 per cent.

You can work out your relevant minimum contributions using the Pensions Regulator’s tool.

Larger businesses might choose to operate their own pension scheme, but small firms can choose to outsource their scheme to a private provider or use the government’s own provision. This could potentially reduce the total cost to small businesses quite significantly.

The government scheme is called the National Employment Savings Trust, or NEST. It has been designed for automatic enrolment, and may provide the most cost effective solution for small businesses. It is fully online, and can be administered almost entirely through NEST’s own online dashboard. Crucially it has no set-up charges, and boasts low costs for members. Employers do not have to pay anything other than their contributions when using NEST. Instead, charges are levied on individual members, at an annual rate of 0.3 per cent of the total value of the member’s fund, and at 1.8 per cent on each new member contribution.

If you already operate a PAYE scheme you can expect to receive a letter from the Pensions Regulator 12 months prior to your staging date. If you sign up for NEST now, you will also receive ‘countdown emails’. They will then guide you through the process of setting up.

It is important to understand that NEST is not the only available option, and you may wish to seek independent advice before making a decision.

Failing to comply with the legislation will result in significant penalties, so Cool Ventures have linked up with local professional pensions advisors to help you through the process. Why not get in touch to discuss your individual requirements before it is too late to put a scheme in place?

The government is to extend its popular Startup Loans scheme

The programme, which extends loans to young entrepreneurs, will receive an extra £34 million in funding – enough, the government says, to support around 7,600 businesses.

Meanwhile the New Enterprise Allowance (NEA) will be extended for new starters until the end of 2014. The NEA has supported some 26,000 businesses, and the government says that the new extension will provide mentoring to a further 60,000 people.

The Startup Loans scheme is currently available to entrepreneurs aged between 18 and 30, but the upper age limit is set to be removed. The scheme provides mentoring and loans, which are administered by delivery partners across the country.

While the Startup Loans scheme has been popular, this week it emerged that the programme has only provided support to 8,000 new businesses – a small proportion of the 35,000 people who have registered their interest.

Announcing the extensions, the Prime Minister said: “I am determined to do all I can to support the British economy and that includes helping small businesses and budding entrepreneurs to get on. I the last two years we have helped tens of thousands of people to turn their ideas into viable businesses, and this additional support will help thousands more.”

If you would like more information on the Start-Up Loan scheme, or other sources of start-up loans please contact us on or call 01225 580850

Overcoming the problems of e-commerce

For businesses that depend on e-commerce, one of the greatest problems is the loss of personal contact with their customers. For many small enterprises, the thing that sets them apart from larger corporations is their ability to deliver a personal touch. This competitive advantage can be lost in trading over the internet.

For the customers the downside is not being able to see or touch what they are buying. For certain products, such as books, CDs and so on, this is not a problem: the latest Harry Potter bestseller is exactly the same whoever is supplying it. However, if you are selling products with individual characteristics you have to work your way around this problem through effective website design.

For example, items sold via mail order are usually illustrated in lavish (and costly) colour catalogues. A website can be even more effective at illustrating a product because you can include options that allow different views of the same product or allow customers to 'zoom in' on a particular detail.

But as you are selling products 'unseen', you need to be prepared for a higher than usual number of returns - experts suggest around 20 per cent of goods sold via mail order end up being refunded. This is because customers may discover that it is not the product they want only when it is delivered.

As such, you need to be aware that this significant level of refunds will have a major effect on your cashflow. For this reason, selling customised products over the internet should be undertaken with care.

Making your business stand out on the internet is extremely difficult. Although customers can get a list of everything from 'organic beef butchers in Edinburgh' to 'dealers in spare parts for Hornby model railways' by using search engines, there is no guarantee that they will see your company's name. This is particularly true if you are one of a number of businesses selling similar things. You should consult an expert on internet marketing and search engine ranking if you want to improve your performance in this area.

Government clamps down on minimum wage and un-paid Internships

Employers who pay their staff less than the national minimum wage (NMW) risk damaging their business reputation and suffer from low productivity and high staff turnover, a Government survey has found.

The findings come as the Department for Business Innovation and Skills steps up its scheme to 'name and shame' employers who break the law by failing to pay their employees the NMW.

According to the survey:

  • 80 per cent of consumers 'would not use the services of a business' if they found it paid less than NMW
  • businesses that pay the right rates see more productive staff, with eight in 10 employees admitting they would 'not work as hard' if they were underpaid
  • the majority (85 per cent) of employees said they would seek alternative work if they were underpaid.

Employment relations minister Jo Swinson said that the majority of employers pay their staff the NMW.

"The Government is cracking down on those few rogue companies who are not doing the right thing and breaking the law by underpaying their staff."

"Employers should be well aware of the different rates for the national minimum wage depending on the circumstances of their workers. Ignorance is no excuse."

Since 1 October 2013:

  • The adult rate (21 years plus) increased by 12p to £6.31 an hour
  • The 18-20 year old rate increased by 5p to £5.03 an hour
  • The 16-17 year old rate increased by 4p to £3.72 an hour
  • The apprentice rate increased by 3p to £2.68 an hour.

HMRC is also carrying out targeted checks on 200 employers that recently advertised internships to ensure they are paying the national minimum wage (NMW). HMRC warned that employers found to be breaching NMW laws would be publically named and shamed and could incur a fine of up to £5,000. According to HMRC figures, penalties were issued to 466 firms for failing to pay the minimum wage in the tax year to April 2013, up from 381 in the 2009/10 tax year.

Countdown begins to national insurance cut

Legislation is on its way that will cut the costs of every business and charity employer by hundreds of pounds next year.

The National Insurance Contributions Bill, which was introduced in the House of Commons on 14 October, will cut national insurance contributions by £2,000 for up to 1.25 million employers. Around 450,000 businesses – or one third of all employers – will be taken out of paying national insurance contributions altogether and more than 90 per cent of the benefit of the new allowance will go to small businesses with fewer than 50 employees.

Charities and Community Amateur Sports Clubs will also be eligible. Up to 35,000 charities with employees are expected to benefit from the Employment Allowance, by around £45 million a year in total.

The government said that as a result of the new allowance, businesses would be able to employ four adults or ten 18 to 20-year-olds full-time on the National Minimum Wage without paying any employer national insurance contributions at all.

For employers to claim the allowance, they will need simply to confirm their eligibility through their regular payroll processes, ensuring that up to £2,000 will be deducted from their employers’ national insurance liability over the course of the year’s PAYE payments. A new online calculator has been launched to enable employers to see the overall impact of the allowance on their payroll or of taking on an extra employee.

Firms should act now to comply with data protection reforms

Deputy Information Commissioner David Smith has outlined several ways in which firms can prepare for forthcoming reforms to EU data protection rules. The draft General Data Protection Regulation was approved by a European Parliamentary committee last week. Although the final version of the Regulation is still subject to change, Mr Smith said business owners should start reviewing their current procedures for processing personal information to ensure individuals provide 'explicit' consent. He also said that firms should expect new laws to be introduced requiring them to have systems in place to make sure personal information is deleted upon request from an individual. The reforms are not expected to fully come into force until 2017.


What do you know about Universal Credit?

Universal Credit supports new business and provides incentives to help you become self-employed and grow your business. It is being gradually rolled out across the UK from 29 October 2013 and claimants will be expected to apply online. To find out more please read self employment guidance and FAQs

Don’t get caught out by phishing scam

When is a tax refund not a tax refund? Answer: when it is a ‘phishing’ scam designed to part you from your hard-earned money.

HM Revenue & Customs (HMRC) is warning of a new scam targeting tax credit claimants by email, claiming to be from HMRC. The email asks the recipient to open a “PDF report on your 2013 tax refund” but the attachment in question contains a Trojan virus and should not be opened under any circumstances.

A Trojan virus allows a third party to access your computer, including sensitive information such as bank details.

There are a number of warning signs to be aware of. The first is that the email comes from an address called ‘’ – note that the word ‘refund’ is misspelt to read ‘retund’.

The second is that HMRC will never send notifications of a tax rebate or ask customers to disclose personal or financial information by email – another common ploy used by fraudsters.

If in doubt, you should not open any attachments or click on any links in the email, but instead forward it on to HMRC at, to enable HMRC to build a database of scams currently operating.

No one wants to pay more tax than they have to, so the offer of a tax refund will always sound appealing. These scams operate on the basis that people will click on links or open attachments without stopping to question their legitimacy.

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