BUSIN
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1 0 / SMALL BUS INESS 22 . 06 . 14
HOW I MADE IT
WORLDCUPPARTIESFACETAXPENALTIESSRwrites: My company is hosting aWorld Cup event andwe have invitedstaff and clients.We have hired alocal pub for one of the footballmatches andwill be providing foodand drinks.Will this have any taximplications for the business?
The tax treatmentwill depend on themain reason for hosting the event. Ifit is intended as both a staff rewardand entertainment for guests, youwill need to apportion the cost byheadcount and apply different taxtreatments,writes Jon Dawson,partner at Kingston Smith LLP.If, instead, the event is aimedmainly at staff ormainly at clients,you should apply the appropriatetreatment to the full cost.For employees who are being
rewardedwith an invitation towatch the game and socialise withcolleagues, this will be staffentertainment. The cost is taxdeductible for your company.Staff entertaining is a benefit in
kind for employees, unless it is atrivial amount— and this is not anannual event so it does not fall withinthe £150-a-head exemption. For anydirectors or employees attendingwho earnmore than £8,500, the costshould be reported on their annualP11Ds. This incurs a nationalinsurance cost for the company. Ifthe company has a PAYE settlementagreement, it can be added to this.Any employees who are required
to attend as part of their job to hostthe guests will be exempt frombenefit-in-kind tax. Their share ofthe cost will, however, be deemed tobe business entertaining, which isnot tax deductible for the company.The cost of hosting your clients
will also be classed as businessentertaining, which is disallowablefor corporation tax deductions.If the company is VAT registered,
you can recover any elementapportioned as staff entertaining.This would not be possible if themain intentionwas to entertainbusiness clients and contacts.
ALLSTAFF CAN DEMANDFLEXIBLEHOURSTGwrites: Howwill the new ruleson flexible working affect me? I haveonly 12 staff and business is busy.
The law on flexible working is aboutto change significantly,writes Peter
Done, managing director of Peninsula.From June 30 all employees with 26weeks’ service will have thestatutory right to request flexibleworking.Thismeans they can ask for a
formal adjustment to their workpatterns, which can includeworkingshorter days; a shorter week;movingstart and finish times and so on.Currently, only employees with26weeks’ service who have achild under the age of 17 or caringresponsibilities for an adult maymake a statutory request.The pool of employees whowill
have the right tomake a request islikely to increase hugely and youmayreceivemanymore requests. Thiswill increase the amount of time youmust spend on administration andtheremay be difficult decisions tomakewhen you receive conflictingrequests.Because the right is no longer
linked to family commitments, youmay receive requests to adjust hoursfor all types of reasons— anemployeemaywant to reduce hishours so he can spendmore timewith his new puppy; anotheremployeemaywant to attend a cakemaking course that takes place onWednesday afternoons.Whereconflicting requests are received, youare not responsible for judgingwhichismore valid, although youmaychoose to prioritise those relating tochildcare or disability.Youmust consider each request in
a reasonablemanner andwithin areasonable time. There are no longertime restrictions onwhen youmusthold ameetingwith the employee todiscuss the request, but theproceduremust be completedwithin threemonths of the requestbeingmade.You no longer have to allow a
companion to attend themeeting orto hold an appeal, but a tribunal maytake a harsh view if you do not.There are several prescribed
reasons onwhich youmay refuse arequest, and thesewill not change.
Business doctor
It didn’t take long for KrissSooniktorealisethatshewaswasting her money. Whenthe fledgling entrepreneurbegan selling lingerie andswimwear she set out towin
customers overseas, but she soonrealised that transferring moneyacrossborderswaseatingintoherprofit margins.“Iwaspayinghigh fees to send
money to suppliers, and morefees to receive money from salesoverseas,” said Soonik, 30, wholaunched her brand in 2009.She and an assistant run the
business from Islington, northLondon, and the products aremade in Estonia. “Now we havestockists in 15 countries and it’simportant we save every pennywe have. I’m a start-up, I don’thave cash towaste.”After two years, she found an
alternative to the banks. Soonikbelieves that TransferWise, apeer-to-peer money transfersite, has saved her more than£1,200 in fees. The site allowsusers to transfer cash around theworld at mid-market exchangerates for a fee of 0.5%, or a flat£1if the amount beingmoved is lessthan £200.“Nobody likes giving their
money away and that’s what itfeels like when you’re using abank,” said Soonik.She is not alone in her quest to
save money on overseas trans-fers and exchanging currency.Businesses with suppliers andcustomers abroad often do notrealise that banks are chargingthem high fees and loading onother costs.A “mystery shopping” survey
by Charterhouse Researchrevealed the additional costsimposed on businesses whentransferring cash to and fromoverseas clients. For sending€1,000 to Germany, Santandercharged a £25 fee but also a fur-ther£29inotherfees.Nationwidecharged £25 plus £20.56, andLloyds £20 and a further £24.72.There are, though, ways
aroundtheheavycharges.Onlineservices such as TransferWise,Currency Fair and Midpoint can
helpyou tododge thebanks, savemuch-needed cash and find areasonable exchange rate.“The small businesses in this
country are the hardest hit. Thetransfer fees and thehidden ratesthey have to pay are often worsethan those for individuals,” saidKristo Kaarmann, previously abanking consultant at PwC. Heset up TransferWise with TaavetHinrikus, 33, who had moved toBritainafterworkingforSkypeinits home country of Estonia.“I realised each time I made a
transfer to my Estonian accountthat money was going missing,”said Kaarmann, 33. “I was losingabout 4% to 5% of my moneyeach time I made a transaction. Iwasn’t happy with the bankstaking that. I felt I was beingrobbed and it was frustrating.”Since launching thesite in2011
they have raised almost £20mfrom venture capital companiesand investors, including IndexVenturesandSirRichardBranson.TransferWise, which has 25
employees in Shoreditch, eastLondon, and 75 technical staffin Estonia, has transferred morethan £1bn to date and says it hassaved users £45m in bank fees.Anonlinepollofmorethan4,000of itsBritishcustomersfoundthat85% felt they had underesti-mated their banks’ fees.Nik Darlington did not even
bother calling his bank managerwhenhe startedhis company.“Itwould have taken too long to setup the transfer service so I wentstraight to a faster onlinesystem,” said Darlington, 28,who established Red SquirrelWine in 2012 and has three staffat the headquarters in Chiswick,
west London. His website sellsrare-grape wines from Europe,South Africa, North and SouthAmerica and theAntipodes.Darlington has used Transfer-
Wise tomovemore than £20,000to overseas suppliers and esti-matesthathehassavedmorethan£1,000.“Peoplecan’tbebotheredto check how much their banksare charging so they end up pay-ing much more for no reason,”he said.DanHancubelieveshis photo-
chromic lens company has savedeven more by using CurrencyFair. Shyre exports chemicals forthe lenses to manufacturers inChina and Korea and distributestheir products here. About 90%of his business is overseas. “Weget much better exchange ratesusing thepeer-to-peer site,” saidHancu, 35, who co-founded the
company in Shrewsbury, Shrop-shire, two years ago. “We’vesaved about £5,000.”Currency Fair allows cus-
tomerstochoosearatefromusersin its “marketplace” instead ofthe rate it offers, if they prefer.It charges 0.15% on the totalamount exchanged and a £3transfer fee, plus an exchange-rate margin. It has made morethan £800m of transfers, savingcustomers £34m in bank fees todate, and about one-fifth of itstransactions are made by smallandmedium-sized businesses.“Cash savings for small firms
arecrucial,”saidBrettMeyers,41,a formerbankerwhoco-foundedDublin-based Currency Fair in2010. It has 35 staff and officesin London and Australia. “Feescharged by banks aren’t justifiedin this day and age,” he added.
Peer-to-peerservices offer bigsavings on thecost ofmovingcurrency, writesKiki Loizou
Stop bank raids onoverseas payments
Lingerie retailer Kriss Soonik has saved£1,200 by going through TransferWise
VICKI COUCHMAN
Underfloor heating? It stoppedus catching a cold in recessionWHEN their electrical contracting busi-ness went bust in the recession, brothersMichael and Steven Lewis had to rethinkrapidly. “We went from six months oforders to nothing, which was terrifying,”saidMichael. “Weneeded todo somethingnew with our skills, and quickly, or ourmortgages wouldn’t get paid.”Part of their work had been installing
underfloor heating systems. They foundthat suppliers knew little about the prod-ucts: “You’d go to an electrical wholesalerand get that sharp intake of breath.”In 2008, sensing an opportunity to get
back inbusiness, they foundedtheUnder-floor Heating Store offering free next-daydelivery of products such as heatingmats,thermostats and insulation. In 2013 thecompany had sales of £7.7m and isexpecting £9.5m this year.Its rapid growth earned the Underfloor
Heating Store a place in The Sunday TimesFastTrack100leaguetableofBritain’sfast-est-growing private businesses.“We’ve had to learn all the pitfalls of
running a business, and how to get on asbrothers and partners,” said Steven. “Ithas been testing at times.”Thecompany, based inBasildon, Essex,
employs 25. Michael put a £50,000 per-sonal loan from Lloyds TSB into the busi-ness, which began trading in 2009 with afurther £100,000 start-up loan from Bar-clays. “That second loan was fantastic,”said Michael. “It enabled us to buy morestock, invest in computers and push thewebsite forward.”Today, about 80% of the company’s
materials are sourced from British sup-pliers.Aswell aswaterandelectricunder-floor heating systems, the company sellswet room products and mirror demisters.They no longer install the kit them-
selves. “It was a hassle getting goodinstallers; they would let us down by notturning up or walking across someone’scream carpet inmuddy boots.”They recommend installers on their
website, where customers can find videosand instruction manuals on self-installa-tion. There is also an advice line.“We don’t employ sales people,” said
Steven. “We have qualified plumbers andelectricians on the phonewho knowwhatthey are talking about and give the cus-tomer a confidence boost.”Appearances on theBBC seriesDIYSOS
and Channel 4’s The Home Show boostedsales.StevenisworkingontheirfirstTVad,due to air in September. “Michael is moreacademic,” he said. “I get to do the funstuff, which is fine forme.”The brothers were born and raised on
Canvey Island in Essex and attended Fur-therwick Park School. Their father was arailway engineer, and now owns a pub in
Rainhamwith theirmother. “Weboth leftschool not knowing what we wanted tobe,” saidMichael, who startedworking atLloyd’s of London in 1990, aged 16.He quit after four months and went to
Israel to work on a melon farm, returningsix months later to join his brother, whowas pulling pints at their parents’ pub.Michael then studied at South Essex
College forhighernational certificates andCity & Guilds qualifications in computingelectronics, design and programming.Steven took on trade apprenticeships inplastering and electrics.“I would study everything if I could,
whereas Steve is quite practical, so wework well together,” said Michael, whograduatedwithanOpenUniversitydegreelast year. “We have been quite lucky.”In 2000 they had started an electrical
contracting and property developmentbusiness in Brentwood, Essex. It grew
steadily until the housing crash in 2007.“We lost everything, all themoneywehadmade,” said Michael. “We had no money,no work, big mortgages and young chil-dren. At one pointmywifewas sellingmyDVD collection to pay the bills.”Moving quickly, the pair started the
Underfloor Heating Store from Michael’sbedroom in Billericay. “We had to build asmall cabin in the garden when the stockcame in as mywife was getting tired of ususing the house as a storage facility.”Theyboughttheirfirstwarehouseayear
later. Today they have three, and a show-room and trade counter in Basildon. Theyhave linked up with Samsung to becomethe biggest distributor of the manufac-turer’s heat pumps and solar panels.Steven andMichael, who each ownhalf
the business, are looking to export more,withGermanytopof the list.Theirwebsiteis available in nine languages.The Underfloor Heating Store donates
10p from each order to Little Havens chil-dren’s hospice in Essex. Its contributionhasnowreached£30,000.“Werealisedweneeded to give something back.”Michael, 40, lives in Billericay with his
wife, Paula, and their children Daniel, 8,andEthan, 6.His advice to aspiring entre-preneurs is: “Nevergiveup.Evenwhenwedoubted and everyone said we’d fail wecarried onworking.”Steven, 36, lives in Leigh-on-Sea with
his fiancée, Louise, and their boysGeorge,9, Henry, 6, and Hugo, 1. He adds: “Youhave to know your product and whatyou’re talking about.”
Hattie Williams
Steven and Michael Lewis are preparing for a big push by advertising on television
Michael andSteven LewisFounders of TheUnderfloor Heating Store
Kingston Smith LLP, the charteredaccountant, and Peninsula, theemployment law firm, can adviseowner-managers on their problems.Send your questions to BusinessDoctor, The Sunday Times, 3 ThomasMore Square, London E98 1ST. Adviceis givenwithout legal responsibility.
Employment LawExperts
