WILL I BENEFIT IF IREGISTER FOR VAT?HHwrites: Last year I set up aninvestment advisory business.Now that fee and commissionincome streams are established,I suspect itmay beworthregistering for VAT. If it is,when can I register?

Financial services is a complex areaas far as VAT is concerned, writesTomMoore, financial services partnerat Kingston Smith LLP. Very simply,fees are likely to be standard ratedfor VAT purposes, whilecommission is often exempt. Butultimately the substance of thework you do governs the VATtreatment, not its name.You can voluntarily register for

VAT at any time if your businessmakes, or intends tomake,“VAT-able” supplies, even if theirvalue is below the VAT registrationthreshold of £79,000 a year. Onceyou exceed this threshold, VATregistration ismandatory.Registeringwill add 20% to UK

clients’ invoices, costing them extraif they cannot recover it, so bear inmind the impact on your business.However, you can recover a part ofthe VAT you incur (input VAT) onexpenses, including IT costs,professional fees, regulatorycompliance fees and possibly rent.If youmake both taxable and

exempt supplies, youwill be in a“partial exemption” position. Here,you can recover only the input VATrelating to the standard-ratedsupply, plus a proportion of theinput VAT that you cannot attributeto either the taxable or exemptsupplies, whichmight be the bulkof your costs. You cannot recoverany input VATwhich relates to theexempt supply, though, unless it isbelow the deminimis level (lessthan £625 amonth on average andnomore than 50% of the total), inwhich case you can recover it all.While administratively burden-

some, registering for VATwillnormally save youmoney becauseof the input VAT you recover. If youare looking to register voluntarily,though, do bear inmind the impact

on your business if you startcharging 20%VAT on fees. Also, therules can be further complicated ifyou have overseas clients.

AVOID THE TRAPS OFINCENTIVE SCHEMESBAwrites:We are looking tointroduce incentives such as aChristmas bonus, performancepayments and an extra day ofholiday for top achievers.Wewillgive these a trial run andmaydrop them if they are notsustainable. How dowe includesuch incentives in our terms andconditions and canwe stipulatetheymay not be permanent?

Thewording you use is key inproviding yourself with theflexibility to withdraw an incentivescheme,writes Peter Done, managingdirector of Peninsula. Therefore, youmust be extremely careful with theterminology, and it is best not toinclude such schemes in your termsand conditions.To give yourself flexibility, you

mustmake it clear that anyincentive you offer is on adiscretionary basis and not on acontractual one. You should alsostate that you reserve the right toamend or withdraw the incentiveat any time.If something ismade a

contractual term, employees havethe right to expect it. You cannotchange a contractual termwithoutagreement from employees.Therefore, you should be certainwhen offering something on acontractual basis that youwill beable to fulfil those expectations. Ifyou do not honour the payments,employees will be entitled to sueyou for breach of contract.If employees raise a question

about their entitlement to incentivepay, you should be in a position toremind them that you have theright to change or withdraw thescheme.It is advisable to state in a policy

what eventsmay lead to thecancellation of incentive pay. Youmay also want to consider regularbriefings to keep staff abreast ofwhat is happening. Being openmaymake them feelmore involved andprevent queries.

Kingston Smith LLP, the charteredaccountant, and Peninsula, theemployment law firm, can adviseowner-managers on their problems.Send your questions to Business Doctor,The Sunday Times, 3 ThomasMoreSquare, London E98 1ST. Advice isgiven without legal responsibility.

HOW IMADE ITJanet ThorntonFounder ofInspired Energy

Janet Thornton is a fierceself-starter. She leftschool at 16 to supporther mother and twoolder siblings. When

she started her own family 25years ago she worked as a seam-stress and topped up her qualifica-tions at night school.“I have spent hours working on

my own tomake sure I amwhere Ineed to be,” she said. “I’m notfrightened of hard work.”Her determination paid off

when she founded InspiredEnergy, a consultancy that helpsbusinesses to cut their energybills. The company, set up in Sep-tember 2000, had sales of £5.3mlast year and expects a rise to£6.8m in its latest accounts.“We’re a growing business in

exciting times,” said Thornton,who employs 37 staff. “Theindustry is changing every day.”Her team negotiates with

energy companies such as BritishGas and Npower to provide clientswith the most cost-effectiveenergy contracts.Synetica, the energy efficiency

wing of Inspired Energy, is centralto the process. It employs engi-neers to track a company’s carbonemissions, see it complieswith leg-islation and help to cut its bills.Thornton is managing director.

“I have a desk in every office so Ican assess all the components —sales, clients, reports and con-tracts. I amvery busy but I love it.”She invested £6,000 of her own

money to get Inspired Energy offthe ground, avoiding a bank loanby selling her car and taking out asecond mortgage on her home inWilmslow, Cheshire. The businessis based in Kirkham, Lancashire.“If I want something done I’ll

roll my sleeves up and do it myself— even if it is cleaning the officekitchen.”Thornton, 51, took her first job

at 13, cleaning in the eveningsafter school. When she left CarrHill High School in Kirkham, withO-levels and CSEs, she became asecretary for a publisher and wentto night school to take A-levels inbusiness management andfashion design.

Her mother managed a chemistbut stopped work to provide child-care for her grandson Morgan,Thornton’s youngest child, and is

now a part-time administrator atInspired Energy. Thornton’sfather, an engineer, was employedat British Leyland, the car maker.He too now works at InspiredEnergy alongside her father-in-law, previously a senior BritishGasmanager.An accomplished seamstress, at

the age of 16 Thornton designedand created a brand of clothing,Janevie, for friends and family.Over 10 years she expanded herportfolio to include weddingdresses, flowers, hair design, babyclothes and nursery furnishings.In 1991 she took up an appren-

ticeship at the cost reduction andtax advisory consultancy PCMG inBlackpool. “I was their sixthemployee and gained vast experi-ence in the energy sector.”Six years later she was offered a

job at McKinnon & Clarke, anenergy consultancy, but found itstifling. “I started in a very male-dominated sector,” she said. “Itwas full of men saying I couldn’tmake a career of it, that it wasn’t abusiness for women.”Thornton joined Chess Telecom

atAlderleyEdge, Cheshire, in 1998.There she helped with sales andbegan training as a direct energyagent for Powergen.Later that year she was offered

a senior operational position atUtility Auditing (now ChamberUtilities), the energy broker forchambers of commerce,where sheoversaw employment and training.“I embraced the job but felt

there wasmore to do in the sector.I wanted to interrogate the energysuppliers and markets to developmore effective buying strategiesand energy products.”The solution was to start her

own business. Inspired Energyfloated on AIM, the junior London

market, in November 2011.Friday’s closing share price of 9pvalues the company at £36.3m.Thornton now owns 41% of thebusiness with her husband, Mat-thew, the sales director.He joined in 2002 after a career

in technical recruitment. In 2005he established the company’s riskmanagement division, nowadvising 110 clients with a totalenergy spend of £500mayear. Cus-tomers include the chemicalsdistributor Brenntag, Interfloorand Wedge Group Galvanizing.

“My husband has always beensupportive, so much so he gave uphis career in recruitment to joinInspired Energy,” Thornton said.“Meanwhile, I have been able tomanage the business, its finances,the staff and how we are going togrow.”However, the business already

serves 800 customers and she isreluctant to expand it much fur-ther. “My dream was to create asuper business without compro-mising our focus on the client. Ithinkwe have it.”

Thornton’s daughters Char-lotte, 25, and Jessica, 23, servedtheir apprenticeships withInspired Energy and are nowenergy analysts. She hopesMorgan, now 11, will join the busi-ness after university.Budding entrepreneurs should

think carefully before starting abusiness, she said. “Be sure ofwhat you’re doing and be preparedto take some risks. Be motivated.Look for like-minded employees.”

HattieWilliams

Men said I’d fail ... nowI’ve got all the power

BUSINESSDOCTOR

Janet Thornton, once a seamstress, now advises 800 companies on their energy needs

PHILTRAGEN

12 SMALL BUSINESS smallbusiness@sunday-times.co.uk