Freedom for entrepreneurs?

 

The UK is producing a new wave of entrepreneurs. Self employment is rising swiftly. Many more people now have more than one job, splitting their time between differing paying activities. THis is making our economy more flexible, giving more choice and better service in many areas. What more can be done to encourage others to tread this helpful path?

Most entrepreneurs will not make a fortune, and many will do it for a bit of their lives before moving into an employer based job or retiring. It needs to be relatively easy to do this. This means reviewing the paperwork and compliance involved, especially by the VAT and Income Tax authorities.Someone who is good at gardening or plumbing and provides a good service is unlikely to be a tax expert or to have money to spend on an accountant. Simplification of the demands on them for financial information would help.

Many entrepreneurs aspire to financial success. They do not want to feel that if they are successful too much of their hard earned gains will go in Capital Gains Tax or higher levels of Income Tax. Taking down the rates of both Income Tax and CGT could raise more revenue, partly by encouraging more to venture. At the moment a new business is an asymetric bet. If you lose the taxpayer does not help with yous losses, but if you win, the taxman expects a large share.

One of the most difficult things to do is to hire your first employee. Most businesses remain as one man or one woman bands, fearing the amount of work they would have to do to take on, pay and look after an employee. I am all in favour of good pay and conditions for employees.However, the very bureaucratic requirements which larger companies can handle are difficult for small businesses. The govermentn needs to review whether there can be more flexible rules for one person businesses making that first step.

This entry was posted in Uncategorized. Bookmark the permalink. Both comments and trackbacks are currently closed.

66 Comments

  1. Lifelogic
    Posted May 29, 2014 at 5:52 am | Permalink

    There is a need for a huge simplification of employment laws, health and safely, tax and NI laws. If employment laws were simply some would not need to be self employed.

    Anything that can reduce the number of essentially parasitic jobs (state and private sector) and increase the number doing real & productive things like building, engineering, selling, designing, mining, fracking, financing, transporting ….. rather than health and safely consulting, HR consulting, litigation, tax advising, ambulance chasing, legal advising, environmental building control compliance, equality advising, EU gender and discrimination compliance, carbon emission compliance ….. surely has to be a good thing.

    Real jobs not parasitic jobs (jobs that are only needed due to the hugely over complex and largely stupid regulations & tax laws, employment laws, equality laws, planning laws, H&S laws, OTT environmental laws, national insurance laws, pension laws, bat & newt protection laws and the likes)

    If you go into a business book shop 90% of the books are not about doing useful things that create money, they are about all the laws, taxes and endless regulations and structures that are there mainly to stop or to deter you.

    • Lifelogic
      Posted May 29, 2014 at 6:20 am | Permalink

      The new compulsory workplace pension laws are yet another absurd obstacle put in the way of business and employment. It is very easy for 10%+ of your wage bill to be wasted in compliance costs with NI, PAYE, Pensions, Student loan collection, Child support payments, employment contract compliance, tax collection, employee selection laws, disputes, settlement contracts …… so we are perhaps all 10% poorer as a result of all this pointless, time consuming, complexity. All distracting managers from productive work.

      You are even at risk of legal action from people you have not ever taken on, nor even interviewed. There are even professional potential employee, serial litigators just looking for reason to take action through a totally unfair tribunal system.

      But this is how Cable and Cameron types seem to like it. Has he found a lefty pro EU, green crap, art grad, PC, woman for the BBC trust yet. Can all the men looked over then go to then go to tribunal thank to Cameron or is it only one way?

      I see the BBC has decided that the word girl in now unacceptable and sexist. Can we perhaps have a list of these words that we can no longer use?

      Coconut, girl, hysterical, choc ice, lady, to welsh (on a deal), scot, prostitute, girl friend, fat, stupid, …. perhaps we need a BBC, non PC words app just to help us all keep up. What is coming next after “people of colour” I wonder and when will this expression be no longer be PC?

      • uanime5
        Posted May 29, 2014 at 11:21 pm | Permalink

        The new compulsory workplace pension laws are yet another absurd obstacle put in the way of business and employment.

        They were introduced because there’s a pension’s blackhole caused by companies not giving their employees a pension.

        There are even professional potential employee, serial litigators just looking for reason to take action through a totally unfair tribunal system.

        They can only do this if they can prove that you didn’t hire they because you discriminated against them (usually because of their gender or race) or you harassed them. As long as you can provide a valid reason for not hiring them (such as another candidate being better suited for the role) or an account of the interview that didn’t involve harassment (having another person involved during the interview and the hiring decision will strengthen your case) you stand a good chance of winning this tribunal.

        • Edward2
          Posted May 30, 2014 at 12:26 pm | Permalink

          You forget to mention Uni that these tribunal cases come at a cost of several thousands of pounds to the small business owner and little or no cost to the often vexatious claimant.
          Your innocence in this matter shows that you have never ever employed anyone.

        • libertarian
          Posted May 30, 2014 at 2:41 pm | Permalink

          Uanime5

          There’s a pension blackhole caused by Gordon Brown and your Labour Party stealing all of our pensions when you were in government

      • Hope
        Posted May 30, 2014 at 8:42 am | Permalink

        There is a taxation crisis, contrary to claims and promises from Cameron four years ago. Still no significant spending cuts. Much borrow, spend and waste in the New Labour spirit. Cameron has nothing to offer the working aspirational class. He has given them a life time of debt for working hard at school, which are still mainly unfit for purpose, and getting into a good university. After working hard all their life forced to sell their home to live in the same care home as those who contributed nothing. Now he wants to raid their bank accounts without any safety net or legal restraint. State press will grow and the ability to speak out will diminish. Welcome to Cameron’s world of socialism.

    • uanime5
      Posted May 29, 2014 at 11:13 pm | Permalink

      There is a need for a huge simplification of employment laws, health and safely, tax and NI laws. If employment laws were simply some would not need to be self employed.

      Well the easiest way to simplify these laws is to make the employer always responsible for any injury their employee suffers and to make it illegal to fire anyone. Simplification does not mean giving employers more power.

      If you go into a business book shop 90% of the books are not about doing useful things that create money, they are about all the laws, taxes and endless regulations and structures that are there mainly to stop or to deter you.

      That’s because most people who start a business want to know the legal requirements for starting and running a business. They already know how to do “useful things that create money” because no one would start a business in an area they know nothing about.

      • JoeSoap
        Posted May 31, 2014 at 6:40 pm | Permalink

        Do you think people should take absolutely no responsibility for their own actions as employees at work? We just hire people to do what they want when they want how they want and they’re never liable for their actions. A bit one sided isn’t it?

  2. Tim Woodward
    Posted May 29, 2014 at 5:59 am | Permalink

    The threshold at which a small business are required to pay VAT kicks in at around the time many businesses could be thinking of expanding (£79k turnover), bringing in new bureaucracy and taking money out of the company. This increases further the business risk at that fragile time, and therefore many self-employed people prefer to stay small. I reckon a big rise in the threshold would have positive effect for employment across the country.

  3. Mike Stallard
    Posted May 29, 2014 at 6:37 am | Permalink

    I was on the dole through most of the 1990s. I received excellent training at the time on how to start up a new business. The sad conclusion I came to (a trained teacher) was this: you can’t. Buying a school cost, at the time, about £1,000,000 and I have not got that kind of money. Have you? When I tried to start up a free school more recently, the government in the form of the DfE was in there like a rocket, fussing, dictating how we had to set about it, making sure of compliance with all the equality legislation and so on.
    Coaching did not bring in a living wage.

    My heart goes out to people on the dole who are trying to start up a new business. It really does.

  4. Lifelogic
    Posted May 29, 2014 at 6:53 am | Permalink

    I see we now not only have to pay for people to sit and home watching day time tv and for their their junk food but even now have to pay for them to go to weight watchers.

    Still I suppose it has more chance of working than the holistic medicine the NHS funds with our money.

  5. Alte Fritz
    Posted May 29, 2014 at 7:06 am | Permalink

    I used to employ several dozen people and am now a one man band. The reasons for the change are many, but as it stands, I cannot contemplate the circumstances in which I would hire anyone ever again. Would that interest either principal political party?

  6. Richard1
    Posted May 29, 2014 at 7:27 am | Permalink

    There is good evidence that ian Duncan Smith’s reforms are having a very positive effect on this, and many erstwhile benefits recipients are moving into entrepreneurship / self employment. If true this is very good news for the Country, and very bad news for Labour.

    There is a good CGT break – 10% for entrepreneurs up to £10m – but its conditions are very restrictive. Much more encouragement is needed for small scale private equity / venture capital finance, so small businesses can get going. Best of course would be to forget special carve outs such as EIS and Entrepreneur relief and just cut CGT to 20% max, and preferably 15% where it is in the US.

    • uanime5
      Posted May 29, 2014 at 11:27 pm | Permalink

      There is good evidence that ian Duncan Smith’s reforms are having a very positive effect on this, and many erstwhile benefits recipients are moving into entrepreneurship / self employment.

      How exactly is harassing people until they declared themselves self-employed and start claiming tax credits a good thing? It costs the taxpayer the same amount and does nothing to help the economy. It may even harm the economy the unemployed are no longer looking for work.

      Also IDS’ reforms such as Universal Credit and Community Work Project are failing badly.

    • Narrow shoulders
      Posted May 30, 2014 at 7:29 am | Permalink

      The universal credit scheme where tax payer funding changes twelve thousand pounds earned into thirty six thousand tax home. I may be selling The Big Issue along with the EU immigrants when that scheme fully rolls out. That is my kind of entrepreneurship.

    • APL
      Posted May 30, 2014 at 7:53 am | Permalink

      Richard1: “and many erstwhile benefits recipients are moving into entrepreneurship / self employment. ”

      It’s just a curious coincidence that the ONS has decided to measure the proportion of GDP related to drug running and prostitution.

  7. margaret brandreth-j
    Posted May 29, 2014 at 7:33 am | Permalink

    I do remember Mr Cameron proposed a £5,000 help to new starters. At that time was going to enter into a small business and would have been glad of this help.I attained highest marks in 12 modules , had 6 of my own second batch of essays marked well , the first 6 essays were drafted , changed by that academic institution to their specifications which I changed line by line accordingly , which they subsequently failed and asked me to pay again to take.Thus was to go freelance on a job I do anyway. The point is there is an attempt to plagiarise, take talent which goes far beyond the tax man.

    It is not easy to start a business, but there are those who collectively doom it to failure before it starts.

    P.S I am sure that Alan Titchmarsh and Monty Don can handle their own tax affairs.

  8. Alan Wheatley
    Posted May 29, 2014 at 7:36 am | Permalink

    I am pleased to see you have raised the issue of the burden on those who own a business of taking on an employee. The first employee may be the biggest step, but it does not get any less of a burden with each extra employee.

    It seems to me that the burden of being an employer does not become less for the owners until the company has grown to a size where it is possible to employ someone to whom can be delegated the tasks arising from being an employer. Perhaps “employer” tasks is something that could be contracted out to a service company. I have never heard of such a service company, so perhaps there is an opportunity here for a different type of entrepreneur.

    We hear much about employee rights but never the “rights” of the small business owner, who is also an employee. What would the rest of the employees do if one of the two directors decided to take leave of absence to have her baby, and the other director, her husband, decided to take his full paternity leave at the same time? Would there still be a viable business when they returned?

    • Iain Gill
      Posted May 29, 2014 at 5:56 pm | Permalink

      Re “something that could be contracted out to a service company” they are called umbrella companies, many around. If both the worker and hiring business are happy with this way of working its perfectly easy to do it this way.

      • uanime5
        Posted May 29, 2014 at 11:36 pm | Permalink

        Technically an umbrella company is a company hired to calculate how much tax an employee has to pay. So the employer pays the umbrella company and the umbrella company pays the employee.

        Another company that might be more useful is an employment agency as these provides employers with contractors (employees hired by the agency). The agency usually provides a role similar to the umbrella company but they also provide employers with employees. As these contractors are employed by the agency, rather than the employer, they have fewer employment rights. They can also be hired on temporary contracts which the employer is under no obligation to renew.

        • Iain Gill
          Posted May 30, 2014 at 1:59 pm | Permalink

          uanime5,

          sadly factually wrong.

  9. John E
    Posted May 29, 2014 at 7:42 am | Permalink

    Having gone down this route myself I found the setup process remarkably simple and straightforward. I found an excellent local accountant by recommendation from a former colleague, and even found the bank helpful once they understood I wasn’t looking to borrow anything (this was in 2008). I didn’t want the misery of managing another business through a recession – been there, done that, didn’t like it.
    There is a real benefit of risk reduction in having multiple clients as,opposed to one employer.

    But you are absolutely right that the big hurdle is taking on employees. I have avoided doing that and have gone down the outsourcing route paying other independent contractors for their skills and services when needed.. I have even outsourced some routine clerical work to the Philippines – very reasonable costs and the work got done to a high standard while I slept.

  10. oldtimer
    Posted May 29, 2014 at 7:46 am | Permalink

    The tax system is a nightmare for small businesses and those venturing out on their own for the first time. It is evident from the growth and growth of the tax rules which seem to become ever more complex year on year not less. Simplification is needed. And, as you point out, if you are successful you will be screwed.

  11. M Davis
    Posted May 29, 2014 at 7:50 am | Permalink

    I love coming here. There is so much sense written on this blog by JR and commenters, but where, oh where, is the action from the Government on these core issues? Maybe we need to rebel a bit more!

  12. matthu
    Posted May 29, 2014 at 7:59 am | Permalink

    John,

    You know that this government is not libertarian by nature and has no pretension to be so.

    It supports clampdowns on press and Internet blogs.

    It supports clampdowns on expression of opinion by classifying so many areas as off-limits because they are either “against the consensus” or “offensive to minor groupings” or even “anti_European”.

    It supports clampdowns on thought.

    Each year it passes an increasing number of EU directives, often gold-plating them e.g. climate regulations which erode individual freedoms.

    Each year it increases the complexity and extent of taxation, feigns moral outrage at those who take advantage of legal loopholes and seeks to strengthen the punitive reach of HMRC.

    Each year refuse collection gets more complicated, more expensive, more prescriptive, more punitive and less effective.

    Each year councils dream up an ever greater number of fines against the average citizen and increasingly employ bailiffs who also use dodgy methods to increase the amount they reclaim from ordinary people.

    The government is an interfering old nanny that carries a big stick.

    Circumspection is a perennial activity that some might enjoy but without the creation of a whole new set of large, sweeping individual freedoms (freedom of speech, freedom to live in a low-tax society, freedom from unnecessary government interference) such as might be found in a constitution, tinkering is no better than naval-gazing.

    In any case, nobody trusts any of you to implement any substantive changes along these grounds – at least none which will not be overriden by the EU.

  13. stred
    Posted May 29, 2014 at 8:17 am | Permalink

    As you say, there is so much administration to do that it is not worth setting up a small business. Even a one person band needs an accountant to handle VAT and other taxes. Otherwise there is insufficient time to do the job. This is why the cash economy is so large.

    Off subject. Could someone tell us why, when the MSM covered the original rebellion in Ukraine so thoroughly, there is no coverage of the civil war that has started, with heavy weapons used, hundreds of dead and civilans being shelled. Do the editors have to avoid upsetting the EU and US governments, who were keen to help initiate the latest conflict?

  14. Iain Gill
    Posted May 29, 2014 at 8:20 am | Permalink

    I agree John. It is also the case that lots of payments don’t go through the tax system, not always because folk want to operate on the black market, but its simply too much hassle to turn a small payment for working for a friend over the weekend into a legally accounted for invoice and income tax paid payment.
    I would make this part of a radical tax and benefits simplification.
    My own thought is to
    1 Encourage a lot more umbrella companies to setup. Where folk can issue invoices, and get the money into their bank account all taxes paid. And where any tax refunds due can be processed through the umbrellas PAYE payroll software.
    2 Simplify the rules for umbrellas, so the employee insurance etc should be simple for all occupations regardless of risk, perhaps the govt takes on the employee insurance risk if need be.
    3 Put everyone not already on an employers PAYE system onto an umbrella payroll, but let individuals choose which umbrella and swap as they want.
    4 Make all benefits payments as small changes to tax allowance which could be paid incrementally as the tax code is changed through the tax year. The state can decide who gets what tax allowance, but the admin of making the payments if down to the umbrella.
    5 Let anyone doing small jobs, which up till now would have been black market, get the payment paid into the umbrella, and let the umbrella deduct all taxes and pay out net of taxes to the individual. Let anyone operating freelance to do the same on a bigger scale.
    6 Let small companies “hire” their first employees through an umbrella (as to be fair many do now). So any employment rights are the umbrellas problem.
    7 Relax the rules on obligations an umbrella would pick up if anyone stays with them more than 2 years.
    8 Legitimate expenses associated with your work to be paid by the umbrella first without being taxed. Indeed as part of this I would allow all travel to your place of work to be paid out of untaxed income, level a few playing fields there especially for folk where it is only marginally worth working. And one way of encouraging folk to move to this regime.
    9 Change tax on company dividends to be the same as income tax level. Completely removes the incentive for anyone to bother setting up a personal one man band limited company. Makes it much simpler, and cheaper to admin, for everyone.
    10 Move over to this system incrementally. Keep things simple so the umbrellas can use standard payroll systems, and invoicing, and tax systems. Over the transition completely shut down the majority of DWP systems needed to pay benefits, simplify HMRC systems, etc. The state is restricted to allocating tax allowance based on need, and those on benefits would get a tax allowance which triggers “tax” refunds (equivalent to current benefits payments), and a nominal one pound a month payment to trigger a payroll run for them each month.
    In doing this you have cut out masses of overlapping complex admin, and in doing so ripped a lot of cost out of the public sector. You have given individuals choice over who does their admin, and so some competition for their business. You allow everyone to invoice for small jobs, or work freelance with minimal complexities. Stops the compex taking with one hand, giving with another, mass overlaps of different benefits and taxes, and capture all of that simply in one tax code. Reduces the admin costs massively which should be reflected in lower tax rates for everyone.
    No new software to be designed. All based on proven existing technology. IDS universal benefits style problems minimised.

    • uanime5
      Posted May 29, 2014 at 11:59 pm | Permalink

      6 Let small companies “hire” their first employees through an umbrella (as to be fair many do now). So any employment rights are the umbrellas problem.

      The small company will still be responsible for some employment rights, such as preventing harassment and discrimination. They also can’t unfairly dismiss someone.

      7 Relax the rules on obligations an umbrella would pick up if anyone stays with them more than 2 years.

      Do umbrella companies and agencies have any obligations to people who work for them for more than 2 years? I know that employers have to hire temps but I don’t know if agencies have to hire their contractors.

      Indeed as part of this I would allow all travel to your place of work to be paid out of untaxed income

      How is this different from being able to claim mileage for business related travel?

      9 Change tax on company dividends to be the same as income tax level. Completely removes the incentive for anyone to bother setting up a personal one man band limited company.

      People do this because the company is responsible if anything goes wrong. So if the one man is hired to do a job and botches it only the company can be sued for the damages he’s caused. Thus the company may go bankrupt but the one man will not (though he may be banned from being a director of a company).

      Keep things simple so the umbrellas can use standard payroll systems, and invoicing, and tax systems. Over the transition completely shut down the majority of DWP systems needed to pay benefits, simplify HMRC systems, etc.

      Unsure what level of saving they’ll be if you outsource much of what the HMRC did to the private sector.

      • Iain Gill
        Posted May 30, 2014 at 2:14 pm | Permalink

        uanime5,
        If you’re going to post this stuff it would help if you kept to things you have a Scooby’s about.
        Re “The small company will still be responsible for some employment rights, such as preventing harassment and discrimination.” Harassment is a criminal and civil offence which can be committed by anyone to anyone, it’s not much to do with an employment relationship and a lot to do with common sense.
        Re “They also can’t unfairly dismiss someone.” If you hire an employee through an umbrella the way contracts are normally setup you can declare no more work for that individual at any time. Any employment rights the employee has can only be exercised by the worker against the umbrella, but the contract between the worker and umbrella is usually a zero hours contract so no legal remedy.
        Re “Do umbrella companies and agencies have any obligations to people who work for them for more than 2 years?” employees are able to bring a wider range of cases via employment tribunal after 2 years. Before then it’s strictly discrimination or under payment. Same for any employer, in this case it’s the umbrella.
        Re “How is this different from being able to claim mileage for business related travel?” most PAYE employees currently have their official working location specified as the employers address, and nobody is able to legally claim expenses for travel from their home to that address. Umbrellas like consultancies normally make their employees home based staff technically, so that travel to any office from home can be claimed free of tax according to the tax rules. I was just proposing to make that tax break more common.
        Re “People do this” certainly limited companies are used to limit liability. But your liability is also limited if you operate through an umbrella, as the hiring organization will only be able to sue the umbrella and not the worker and the umbrellas have good insurance to handle the legal costs etc. if this happens. The main thing that keeps people using one man band companies to operate through is the share dividend being taxed less than pay, meaning they can get money they earn out as dividends with significantly less tax.
        Re “Unsure what level of saving they’ll be if you outsource much of what the HMRC did to the private sector.” It’s mainly the DWP systems that are a wasted cost. The tax and DWP systems do not need to be this complex, simplifying would save masses of money.

  15. Posted May 29, 2014 at 9:16 am | Permalink

    A friend owns a small timber and DIY shop, employing himself, his wife, son and a casual labourer/driver. The wife spends about four days a week dealing with paperwork for various national/local government sources and one day dealing with the suppliers, invoices, etc.
    Much of the official paperwork is irrelevant but has to be read “just in case”. Apart from the items you mentioned, there are health and safety inspectors, council officials, and a whole range of others. This state induced overhead may be acceptable to a large company, but not to one with so few people where it represents almost a quarter of the workload.

    • Lifelogic
      Posted May 29, 2014 at 8:53 pm | Permalink

      Often more than a quarter on pointless activity and then they want about 50% of profits off you in tax, ni, vat, insurance premium tax, road tax, fuel tax, energy tax, rates and the rest on topj.

  16. Leslie Singleton
    Posted May 29, 2014 at 9:25 am | Permalink

    Comes back to why an employer, especially a small new employer, should have to do all, or indeed any, of what he has to do for the Government for free, not to mention the new compulsory contribution to the employee’s pension. It escapes me entirely why the employer should have to do this latter in particular and I think as I have said before that the (presumably) Government advert on the subject is a disgrace–portraying as it does the employer as some kind of enemy.

    • A different Simon
      Posted May 29, 2014 at 7:21 pm | Permalink

      So it’s a bit like employER’s NI contributions – which are of course a tax on the employEE dressed up to make it look like the employee is having less money deducted than is actually the case .

      Both serve to perpetuate the myth that the employer has an unlimited pool of money at their disposal – such an idea can only have originated from somewhere this is actually the case – the Govt .

      Completely agree about the advert too .

      A bit like the HMRC adverts which are little short intimidation of little people along the lines of “Big Brother is watching you” .

      Obviously designed for big time criminals in the City of London . I’m sure they are bricking themselves .

      The connection between employers and pensions is artificial . Companies aren’t likely to be in existence when a person retires . Only the state is so why when the state employs so many people isn’t it carrying out all the administration ?

      • Lifelogic
        Posted May 29, 2014 at 8:55 pm | Permalink

        Indeed.

  17. matthu
    Posted May 29, 2014 at 9:46 am | Permalink

    Mr Cameron is justifiably proud of the fact that he managed to obtain a freeze of the most recent EU budget – nobody expected him to succeed.

    Notwithstanding this, can you ask Mr Cameron what the UK government is able to do to prevent the EU Commission from simply taking on additional commitments which have not been budgeted for, and (if they are unable to prevent this) whether any of these commitments have legal force under treaties that we have already signed up to?

    Will member countries be obliged to pick up the tab to meet those commitments (out of current income) despite the freeze of the budget, and if so, is it meaningful to boast about a freeze in the budget?

    I am particularly concerned about the recent demand for an additional €4.7b to meet an expected deficit for the current year.

  18. Bert Young
    Posted May 29, 2014 at 10:27 am | Permalink

    You are right in saying that it is a very big step in hiring your first employee . I had been a Headmaster for seven years before deciding to take the step as a business professional ( after further education and training ) ; I wanted to express myself in a wider and different field . The early 60’s was a time of change ; family controlled enterprises were closing , markets were expanding , products were becoming ” internationalised “, the Common Market was an open door for more exploitation . Two further years down the line with a front line recognised organisation gave me the courage to set up my own business . It was when I came to the point of having a volume of assignments more than I could safely handle , I knew the time had come to expand and hire . After the first bold step and attracting someone who became a most valuable contributor and friend , the way was open for more and more development . My principle was always to hire the best and most intelligent of people who could add to the range of skills the markets were demanding and to support the front line operators with equally skilled and experienced researchers . The formula worked and 25 years later my organisation had grown to 9 offices spread around the world . It would have been a very different story if the first employee had been a mistake and the chemistry with him all wrong ; we are both very much alive and good friends today . Looking back I valued my years in education – particularly the relationship with children , but , there is no doubt that I found my true self in running my own business exposed to the trials of everyday risk and change . For the past 24 years I’ve been able to make another contribution in the field of education once again – this time at University level . The youngsters I meet are most intelligent , interesting and challenging ; their skills and outlook on life are a revelation for a future bigger and better than what I knew .

  19. Neil Craig
    Posted May 29, 2014 at 10:48 am | Permalink

    One suggestion made in America is simply to double the numbers bar on every regulation – where a new regulation applies to any company with 10 employees, it rises to 20. A block at 50 rises to 100.

    If it doesn’t increase employment in such companies there is no loss of employee/government “rights”. If there is whoopee.

    Unfortunately, while easy to pass in a one line Act, it can’t be done for any EU laws.

  20. Bob
    Posted May 29, 2014 at 11:59 am | Permalink

    Breitbart report that David Cameron is trying to sabotage UKIP’s influence at the European Parliament, just days after trying to appear sympathetic to euroscepticism by telling the British people that their message at the polls was “received and understood.”

    Instead of accepting UKIP’s victory, Cameron has started a drive to cut off the legs of “the people’s army” in Brussels and Strasbourg. He has assigned Conservative Party fixers to do deals with hard-right and populist parties which, until now, the Conservatives claimed were “unacceptable.”

  21. Rods
    Posted May 29, 2014 at 12:13 pm | Permalink

    In Ukraine they have registered “Private Entrepreneurs” where you can have a maximum turnover of 300,000UAH (about £24,000) a year (15% flat tax above this on your profits) and you pay a fixed monthly amount of tax and their equivalent of NI. Profits and offsets don’t apply as all costs are part of you £24,000 turnover. This makes it a very attractive option for service based industries with low material costs. Accounting consists of writing down all income and expenditure in a book, which the government’s tax inspectors, can check. You can employ up to 10 other private entrepreneurs, but the monthly tax you pay goes up and their costs cannot be offset in anyway. This simplified system does mean that the self-employed can concentrate on running their businesses, rather than being unpaid employees of the government (and expected to be experts) for too much of their time.

    Many entrepreneurs I know, including myself, are now one man bands, where we have employed people in the past. Buying in services as we need them these days t is much more efficient, where it allows you to concentrate on adding value rather than expecting to spend far too much of your time as an unpaid government employee.

    If you are one of the 1 in 20 that is lucky and successful so you run the same business for over 5 years and make a reasonable amount of money of course the government jackpot lights come on where they take over 50%, when you add up all the taxes you are paying. Generously they let you keep the minority of your money, for all the long hours, stress, risks and for the 19 out of 20 probably the losses they have made. This time I’m going to doing the sensible thing as my income and taxes go up and move abroad, so I get to keep the majority of what what I earn from my hard work, risk and innovation. Like many technologists, all I need these days is an Internet connection, a mobile, a computer and a desk.

    • JoeSoap
      Posted May 29, 2014 at 6:55 pm | Permalink

      “Like many technologists, all I need these days is an Internet connection, a mobile, a computer and a desk.”

      Indeed, and it should be a primary requisite of somebody taking a risk now that they can offset some of that risk by re-locating when successful.

      The smart graduate going into business would end up paying horrendous taxes with no breaks compared to 8 years ago when the business became a success. It would make sense to relocate asap overseas.

      Goalposts have moved the wrong way since 2006:

      Pension contributions reduced from £260K under Labour to £40K now – more free or less free?
      Lifetime limit reduced from £1.8m and indexed under Labour to £1.25m fixed now.
      CGT was 10% now 28%
      Income tax, NI, NEST, student loan payments etc we all know about.

      On the other hand if your investment goes belly up, there is no prospect of recovering your capital.

      The only positives are increases in capital allowances, which were iniquitous before anyway, and small decreases in corporation tax, but still twice the irish level.

      • libertarian
        Posted May 29, 2014 at 8:13 pm | Permalink

        Joesoap

        As a very active angel investor operating in the very high risk small start up sector I couldn’t agree more. Using my own money after tax investing in a startup the failure rate is quite high but its tough I lose my money, no tax break . One success and I’m taxed to the hilt on exit. If you want more start up finance not provided by banks on high interest then government has to level the playing field for investors.

      • Lifelogic
        Posted May 29, 2014 at 9:00 pm | Permalink

        Indeed 299+ tax increases including those on pensions above from the “low tax Conservative by instinct” Dave Cameron.

  22. BobE
    Posted May 29, 2014 at 12:25 pm | Permalink

    I recently used a very good plumber. I asked him why he didn’t have an apprentice. He said, Insurance, Tax, Training – he just doesn’t have the time for all of the hassle involved. So he works alone and if he needs help he uses other plumber mates on mates rates time swops.
    Its just to difficult to mess about employing people.

    • JoeSoap
      Posted May 29, 2014 at 6:58 pm | Permalink

      No, send him on a Media course at Uni, pay some lecturer £70k or so to spend a few weeks a year teaching drivel, then let him out with a £45k debt to no real job.

      Why not pay the plumber a fraction of that to teach the lad a trade?

      • Lifelogic
        Posted May 29, 2014 at 9:01 pm | Permalink

        Exactly.

  23. Gary
    Posted May 29, 2014 at 12:40 pm | Permalink

    The lack of jobs is forcing people to start their own businesses. This on the face of it is a normal reaction and ok. However, it is not normal when this state of affairs has been precipitated by govt intrusion into the market, a situation that will eventually destroy the middle class.

    As The Telegraph reports, David Boyle
    cautions, “we won’t own our own
    homes, we won’t be able to
    afford it,” adding that “we
    cheerled the rise of property
    prices not realising that it would
    destroy, if not our own lives, but
    the lives of our children.” His
    conclusion, ” the middle classes
    have to wake up to prevent it
    happening and to create a
    political movement that will do
    it .”

    http://www.telegraph.co.uk/culture/hay-festival/10860796/Middle-classes-will-disappear-in-next-30-years-warns-Government-adviser.html

    • Jennifer A
      Posted May 29, 2014 at 7:20 pm | Permalink

      Houses will have to be sold. Therefore they will have to adjust downwards to meet real earnings.

      • A different Simon
        Posted May 29, 2014 at 7:49 pm | Permalink

        The CBI and others sought to destroy pensions so that the money people were putting aside for their old age could instead be made available to pay mortgage interest .

        8 out of 10 private sector workers are reaching the end of their working life with less than £30,000 in savings .

        Why does the Govt and opposition refuse to even acknowledge this time bomb ?

    • libertarian
      Posted May 29, 2014 at 8:09 pm | Permalink

      Gary

      There isn’t a lack of jobs. There are plenty.

  24. John E
    Posted May 29, 2014 at 2:27 pm | Permalink

    I see that prostitution and illegal drug sales are now to be included in our official GDP figures, giving a large boost to the numbers.

    Perhaps the libertarian approach would be to legalise and properly tax these activities? As things stand, the statisticians are being a bit squeamish about the way they estimate these apparently significant contributions to our economy.

    • A different Simon
      Posted May 29, 2014 at 7:42 pm | Permalink

      Are the Govt going to insist that prostitutes work until they are 68 ?

      • Leslie Singleton
        Posted May 30, 2014 at 3:49 am | Permalink

        Simon–I have long said here and elsewhere that GDP numbers are a nonsense; but even I have trouble believing what John E says, though these days I suppose we have to believe anything. It is a wonder that John R has published what you said at all (“Condescending to women”, “Ageist”, “GDP doesn’t have to be useful”??). Somewhere along the line he seems to have lost his “Standard Bearer of the Right” image. Whether that was intentional or not on his part I do not know.

  25. Roger Farmer
    Posted May 29, 2014 at 2:48 pm | Permalink

    All of what you say is helpful, however there are problems out there that you do not touch on for small entrepreneurs.
    There are large operators in the market place who live on the backs of the small entrepreneur by not paying them in a reasonable amount of time. This is endemic in British industry and needs to be addressed by government as a matter of urgency. I would suggest that 30 days is a reasonable period for credit against an invoice. Anything more should accrue punitive interest with an automatic cessation of trading order on anyone exceeding 90 days. I am aware of at least one large power supplier who has made vast profits but is taking in excess of 100 days to pay legitimate invoices. This is ruining small businesses. Perhaps you could divert the attention of the Business Secretary from thoughts of the Lib/Dem succession and get some action in this area.

    • JoeSoap
      Posted May 29, 2014 at 6:43 pm | Permalink

      The nastiest is BT. I refuse to pay them by direct debit as they can so easily make a mistake and rectifying it is a nightmare. So now they send a bill by post, with 14 days from the bill date to pay. The bill must be posted late because it always arrives circa the due date. If I am away or the post actually is late it arrives after the due date. We have been cut off once and come close several times, but I refuse to give in to this and pay by DD.

      • JoeSoap
        Posted May 29, 2014 at 6:44 pm | Permalink

        Of course if you are an SME supplier to BT the rules are, I am certain, different….

  26. Terry
    Posted May 29, 2014 at 3:32 pm | Permalink

    Like so many of your ideas, John this one is very good. So like Mrs T and her methodology to boost the economy and exactly what is required without the need for more money printing.

    Which leads me to dismay that your clear talents are totally disregarded and ignored by the upper crusts of the Conservative party.
    Why you are not THE Business Secretary is one more of the many mysteries of the Coalition that defies the logical and good political sense for the best for the Nation at large and not merely to smooth that surreptitious “deal”. Appointing as its head, a man who originally wanted the Business Department shut down, was not Mr Cameron’s best appointment and one I’m sure, he came to regret.
    Should there be a re-shuffle I hope Mr Cameron will finally see the light and replace the incumbent anti-Business Secretary with one who actually knows the job. Then maybe, we will some serious improvement in the world of the SME.

  27. Posted May 29, 2014 at 3:35 pm | Permalink

    You’ve got to ask why “self employment is rising swiftly”. If people want to have a try at working for themselves and starting a business then that is fair enough, of course, but they should at least have a choice.

    It seems to me that the only other choice for many is the dole queue. Consequently there are many new business start ups which are run by reluctant entrepreneurs who are risking making a bad situation worse for themselves. The failure rate of new businesses is very high. Richard Branson who has become a household name and multimillionaire, but there are many more anaonymous individuals who have lost their homes and families, and in many cases their lives, as their businesses have failed.

    At one time governments had a commitment to the concept of full employment. It is not a phrase often heard now. It needs to be heard more.

    • libertarian
      Posted May 29, 2014 at 8:07 pm | Permalink

      Petermartin2001

      As I’ve told you a few times already there isn’t a shortage of well paid jobs in this country. Oh and also The average self-employed worker has an annual income of £50,820 compared to the national average of £26,093.

      Self employment and starting a business can be 2 separate and different things too.

      You might want to read this too http://startups.co.uk/small-business-failure-rates-plummet/

  28. lojolondon
    Posted May 29, 2014 at 4:58 pm | Permalink

    The UK used to be the best in Europe at this, but since the corrupt, foolish and deeply socialist EU has started chucking out laws, we now compare with the worst countries in the world for small entrepreneurs, ie. probably Germany and France.

  29. acorn
    Posted May 29, 2014 at 5:09 pm | Permalink

    Off topic but topical. Even if you are not a data mining number cruncher, the stories coming out of the 2011 census are a fascinating read.

    “18% of all occupied household spaces were privately rented, an increase from 12% in 2001. This was the largest increase of all housing tenure types. The owner occupied category declined from 69% to 64% over the same period.”

    http://www.ons.gov.uk/ons/dcp171776_361923.pdf .

  30. acorn
    Posted May 29, 2014 at 6:58 pm | Permalink

    There are more self employed now but they are, in aggregate, earning less than before the great recession.

    The new entrepreneurs are those unemployed, that are converted, by DWP , into self employed claiming tax credits, from unemployed claiming job seekers allowance.

    Government has sufisticated ways of telling you lies.

  31. A different Simon
    Posted May 29, 2014 at 7:39 pm | Permalink

    Shouldn’t the tax system also recognise “self UNemployment” ?

    Here is my attempt at a definition :-

    “Self Unemployed” : a previous N.I. payer who has disqualified themselves from out-of work benefits because they were prudent and saved money or built up equity in their accommodation .

  32. Lindsay McDougall
    Posted May 29, 2014 at 11:28 pm | Permalink

    One way of reducing the demand made on entrepreneurs for financial information is to sack some of the people that make the demands.

    At least we are not in the days of the Harold Wilson / George Brown National Plan, when businesses were asked to estimate their sales and employee growth (or decline) and commit their estimates to paper. These inevitably inaccurate forecasts were assembled bottom up to form a National Plan which was then cast in stone. At least that was the idea but it proved impractical within a year – the death of popular Communism.

  33. uanime5
    Posted May 30, 2014 at 12:10 am | Permalink

    The UK is producing a new wave of entrepreneurs. Self employment is rising swiftly.

    Self-employment is rising for 2 reasons.

    1) People cannot find a job so they’re being forced to become self-employed. However these people often earn less than minimum wage which is why the average wage for someone who is self-employed is below the national average wage.

    2) People who are unemployed are being encouraged by the Jobcentre to become self-employed and claim tax credits rather than claim jobseekers allowance (the amount of money you get is similar).

    So the rise in self-employment is more to do with a lack of jobs rather than people becoming more entrepreneurial.

    THis is making our economy more flexible, giving more choice and better service in many areas. What more can be done to encourage others to tread this helpful path?

    People are often doing this because there’s a lack of full time jobs available so you shouldn’t be encouraging other to get into this situation.

    Simplification of the demands on them for financial information would help.

    There HMRC has already simplified the tax system for small businesses. Are your proposing further changes?

    https://www.gov.uk/government/publications/supporting-small-business-making-tax-easier-quicker-and-simpler

    They do not want to feel that if they are successful too much of their hard earned gains will go in Capital Gains Tax or higher levels of Income Tax.

    Why should an entrepreneur be treated any differently from any other company? Especially when many of these companies will be employing more people.

    Taking down the rates of both Income Tax and CGT could raise more revenue, partly by encouraging more to venture.

    I doubt that most people who are could earn more than £150,000 per year or have a business with a turnover of over £300,000 will stop simply because they will be in a higher tax bracket.

    It’s also odd that you mention cutting income tax and CGT but didn’t mention corporation tax.

    If you lose the taxpayer does not help with yous losses, but if you win, the taxman expects a large share.

    You only have to pay income tax if you earn over £10,000 per year and CGT if you sell any assets, so it’s hardly a large share.

    The govermentn needs to review whether there can be more flexible rules for one person businesses making that first step.

    One problem with reducing employee rights for people who work in small businesses is that it may result in people being more reluctant to work in small businesses.

    • libertarian
      Posted May 30, 2014 at 2:46 pm | Permalink

      Uanime5

      As your first statement was completely and totally WRONG In fact the average self employed salary in the UK is £50,820 ( somewhat VASTLY more than NMW ) and just about double the average wage of £26 k I didn’t bother with the rest of your post. You lack credibility

  34. Kenneth R Moore
    Posted May 30, 2014 at 10:08 pm | Permalink

    A ‘New wave of enterpreneurs’ but how many of those that make up the numbers have become self employed to make entry into the Uk easier as an economic migrant ?. Big issue sellers are classed as self employed. Employers like self employed workers as they are more flexible ,they don’t need to provide paternity leave and paid holidays.

  • About John Redwood

    John Redwood has been the Member of Parliament for Wokingham since 1987. First attending Kent College, Canterbury, he graduated from Magdalen College, and has a DPhil from All Souls, Oxford. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.
  • John’s Books

  • Email Alerts

    You can sign up to receive John's blog posts by e-mail by entering your e-mail address in the box below.

    Enter your email address:

    Delivered by FeedBurner

    The e-mail service is powered by Google's FeedBurner service. Your information is not shared.

  • Map of Visitors

    Locations of visitors to this page