Don’t Let the Hidden Legal Costs of Business Put You Out of Business
As an entrepreneur, you’ll have a lot of plates to spin when you’re setting up a new business, from the practicalities of manifesting your idea into reality to setting up pricing and advertising. For those that have been around the block a few times, understanding your legal obligations in any situation is all part of the process. However, if you’re a complete novice, it’s easy to overlook the hidden implications of legal protocols and how they pertain to your business.
Naturally, if you’re starting up any business, you should consult a legal expert on any matters that may be applicable to your industry. In general terms, however, the important concept you need to embrace long before your business becomes a reality is that compliance is always cheaper than a fine. Although ignorance as a defence might get you some leeway in certain situations, it’s not a solid strategy. Indeed, with agencies and organisations now coming down harder on small businesses than ever before, it’s important to be on the right side of the law if you don’t want to bankrupt yourself.
Legal Obligations You Should Already Know
Two of the most obvious legal obligations you have for any business, especially those where you have employees in a workspace, are tax and safety. In the case of the former, HMRC moved to triple its fines for the late submission of tax returns back in 2016. As a small business in the UK, you’ll be obliged to submit regular returns to HMRC on time. In the past, failure to declare your income on time was met with an instant £100 fine and then 5% of your bill after 30 days of the deadline, followed by two additional 5% penalties after six and 12 months. However, under new proposals, the £100 would be scrapped in favour of fine equal to 4% of your bill. Then the additional fines increase to 10% and 15% of what you owe.
When it comes to health and safety, failure to adequately protect your employees and the public can also lead to big fines. According to figures from the Health & Safety Executive (HSE), £32.4 million in fines was issued to UK businesses in 2016. Although the smallest fines started at £100, industries such as manufacturing had average levies topping £112,000. In practice, these are fairly obvious laws and associated fines you need to bear in mind when you’re starting a new business. However, what about the not so obvious obligations? One of the biggest hidden costs of doing business in today’s world is related to cybersecurity.
A Law You Can No Longer Ignore
In 2016, KPMG found that more than 60% of small businesses in the UK had been hit by an online attack. On top of this, ISP Beaming calculated that British businesses suffered 230,000 cyberattacks during the same period. Based on this, the Payment Card Industry Security Standards Council believes that UK firms could be hit with £122 billion in cybersecurity fines in 2018. One of the major contributors to this increased total is the European Union’s (EU) General Data Protection Regulation (GDPR). Coming into force in May 25, 2018, the new directive is designed to improve data protection for business in the EU and trading within in.
In practical terms, any UK business that holds data on EU citizens will be subject to the stipulations of GDPR. This means implementing the clauses of GDPR article 25, which gives guidelines on data protection by design and default. Put simply, if a company collects too much data or fails to implement internal safeguards such as pseudonymisation of data, it could be subject to some heavy fines. Indeed, for technical issues that lead to a breach, the maximum fine is €10 million/£8.8 million or 2% of global annual revenue. For instances of non-compliance, those figures are doubled.
Today, with so much of our business lives taking place online, the impact of laws such as GDPR are going to become even more important. While it might be easy to focus on other legal obligations and neglect the less obvious, cybersecurity is one that you can’t ignore. Unlike 15 years ago when there were fewer threats and less strict operating conditions, today’s economy is different and, as an entrepreneur, it’s your job to make sure you’re on the right side of the law.