Is VAT really that much of a pain?

I file mine online (takes about 2 mins looking at the books to get the figures, and we get an extra 14 days to do so). Refunds are sent to us via BACS. Any VAT we owe is paid via Direct Debit.

Annual return is pretty simple too. Your accountant should handle most of this for you anyway.

You want to experience pain running a small (tech) startup without government support on any level?
Try Spain!

In some ways it was nice to read this article to know that it isn’t rosy everywhere else.

Whoever the editor is needs to actually edit this post. Techcrunch do you just let any idiot write articles here?

Governments are useless, as you’ve stated in your final paragraph but you’ve been asked or decided to write an article stating the bleeding obvious. Er, why?

You haven’t put a funny spin on this and you’ve managed to take the 2007 market blow up personally. We are all dealing with the same bullshit here and you’ve managed to make it more drab that usual.

Sorry to be negative but I have to be honest with this piece.

In reality if you don’t like the way the UK government operates you are free to do business elsewhere. Obviously if yo’re going to write half assed blog posts about them at least make it funny for the rest of us

You should totally come to Bulgaria and try to run a start up here, then you will think UK government is an incubator

oh, yeah, I hear where you’re coming from.

Government is *so* uninterested in its smaller business customers (forgetting that most of the population, not working for government, works for smes, not Plcs).

You can see this in the services on offer… take VAT.
(bear with me on this – it’s symptomatic of the culture)
Yes, you can file online… but the Returns page is *hidden* by the navigation. UI? nope.
& the form itself has to be mis-completed if you’re on a flat rate scheme. (Helpdesk advice: “just ignore that box, yes, it’ll throw an error, but don’t worry” )

Another example, this time from the services supporting enterprise & innovation: email? No, the CEO doesn’t *do* email. wooot! How did they get the job?

The shame of it is that there are some hugely talented, smart, and capable folk involved in government services to business.
The underlying culture doesn’t understand the innovative entrepreneurs that the good guys in government services are trying to help.

Generally, it’s hard to run a start-up anywhere.

We all hate the paperwork side, but you know what, that’s part of running a business – plus, with such low turnover, you didn’t have to register for VAT, but chose to to get the VAT back from your capital purchases, and hence registered because it worked out better for you buying things.

Well, filing is part and parcel of the process. Did you get back enough to cover your time costs for filing? If not, you should have bit the bullet and paid VAT without registering (and getting the it back.)

I looked at many countries for starting a firm, and the UK came in somewhere near the bottom of the list for starting a business.

Good luck, but whine about it less, eh?

It is all about friction–and any element of friction. Startups, especially technology startups, will benefit from any marginal advantage or disadvantage.

+1

Your annual return should take 5-10 minutes to complete and can be filed online which is much better than most countries.

What a whiney post.

Hi Azeem,

Fair play to you for speaking out. These are common complaints of entrepreneurs. Everyone gets frustrated by the sheer amount of stuff there is to do in starting a business, and the non-sales based work that seems to just be an extra un-necessary burden. I know that feeling myself, and have made the same complaints as you at those times.

But it does mean we can be drawn into being a bit illogical and blaming things other than ourselves – and asking for the impossible.

For example, in the same post you simultaneously criticise the government for not regulating the banking industry enough, leading to the financial crisis – and for regulating businesses too much. So where’s the line drawn as to which businesses to regulate and how much to regulate them? Put any human being in charge, including you or me, and everyone else would disagree with our decision on that. But basically what you want is a common human thought: just regulate everyone else. Leave my business alone, but make sure the other businesses sort my pension out properly, don’t overcharge me for services, etc. It’s natural, but not really a valid request.

In my experience the government side has been pretty easy to deal with:

1. Companies House are brilliant. The forms are simple, clear and short. That 363 you complain about takes minutes to submit, especially online. It only needs to be submitted once a year, and is simply a way of checking they have the right information.
I challenge you to find a simpler, cheaper process for forming and administering a limited liability company in any developed economy.

2. The VAT returns are really simple – 7 boxes to fill in on 1 side of A4, which, even if you don’t have an FD or book-keeper, your accounting software can print out directly. You just have to sign it. During the worst of the recession I saw a number of examples of HMRC being extremely lenient in chasing up late VAT returns, payments etc, because they knew times were hard. They’re not bad folk really (although I’ve done my fair share of cursing under my breath in dealing with them – but hey, that’s the relationship between entrepreneurs and tax authorities the world over). You complain of being sent a cheque – did you send them your BACS details with a request to pay by BACS? They’ll do that, but like anyone they do need your bank details.
However, HMRC’s online services are rubbish and need a lot of work if that’s the direction they want to take us in.

3. EIS is a great scheme for encouraging angel investment in fast-growth companies. It’s pretty easy and flexible to setup and use. I can’t see a realistic way to reduce the small amount of paperwork involved. There aren’t many tax-advantageous schemes in developed economies with so little paperwork.

4. EMI is more complex, but then it’s a relatively complex legal agreement between you, your management team and the tax authorities. In total it usually costs about £5k in professional fees to set up. If you’re a fast growth company, that’s not much really. It’s not designed for lifestyle businesses with smaller revenues or funding.

In my experience, entrepreneurs have more problems dealing with large commercial organisations than with government. The banks put fees up while reducing service quality, and forcing you to wait for ages on hold to call-centres who can’t help you anyway, even after you’ve explained the situation to the 3rd person. Large corporate clients make you jump through so many time consuming hoops in drawn out tendering processes for even small-ish contracts, and then pay you late. And large suppliers (the one I hear most entrepreneurs complain about is BT) make so many mistakes, and then don’t seem to care about putting them right.

And, I agree with your point about the Enterprise Finance Guarantee – but would argue that the blame lies more squarely in the private sector (banks) than the public sector.

So, in summary, whatever government we have, run by whichever party, and with whoever leading it, we’ll all always be frustrated by bureaucracy, and either too much regulation (wasting our time), or too little (people nicking our money).

Therefore, I prefer just to hire a good accountant, a good lawyer, and any other professional advisers – and as the business grows to have a good FD – and focus my time on building relationships with my customers and making sales.

If you’re boot-strapping, then the price of that is a lot more hard work and admin to do yourself. But otherwise, if you’re not funded or earning enough to have good staff and advisers to handle this, then your problems may be bigger than just finding the time to fill in a 363.

But at some time we’ve all felt like you feel at the moment – so just keep going and it gets better. Good luck with your business, and have fun.

Wow…I’m sure this guest post took longer than it would to just click through an Annual Return form.

The UK has one of the cheapest and easiest systems to navigate in the world. It couldn’t really be much easier. If you want to benefit from the legal system in the UK…. compliance with CH is not too much to ask really is it.

If waiting in a queue is too hard.. just use the quick drop box to pay in your cheques.

Ultimately though…. if you can’t be bothered with all the paperwork (or e-filing)… just ask a freelance accountant to be your company secretary and do it all. There’s tons of them around.

brilliant post…
this is not the worst place in the world to set up a start up, but could definitely be better.
keep up the good work!

Go move to France then.

Crying over filing a 363 is ridiculous, it’s a simple form that takes like 15 minutes to fill in, once per year. Stop whining about VAT too. If your revenues are just £6k (lol, “high growth”) then why even bother registering for it.

What a joke-shop operation.

Need to add: we all know UK bureaucracy can’t even be compare to France, Spain, Italy ones… still, paper works are now more than they used to be, aren’t them? (And is this maybe a Europe effect?)

Need to add: we all know UK bureaucracy can’t even be compared to France, Spain, Italy ones… still, paper works are now more than they used to be, aren’t them? (maybe a Europe effect?)

Wow, if you’re whining about this, I really don’t see how you’re going to be successful with a startup longer term. These are non-issues. You will be faced with real road bumps/hurdles/walls, and if issues like VAT and returns affect you, I hate to see what you’ll do with REAL problems.

Look you get used to it after the first 10 years – only kiddin…… not sure you really want to hear from above on the VAT simple theory either……

and the good news is ……… we all agree
and now on to taper relief and other adventures in public sector land……..

I totally get the frustration borne out of the desire to get on with the business w/o having to deal with other “stuff” BUT as someone else said its all part of doing business. The UK is comparitively lite when it comes to this stuff and its a mistake to ignore it. Failing to spend 5 minutes doing your annual return could result in your company being struck off with its assets all going bona vacantia to the crown. Worth setting aside a few minutes to avoid surely…

Why do people in the tech industry think that they deserve special treatment if they start a company? Every business in the UK, new or old has to do these things. You will also only get VAT invoices if you registered for it in the first place or have a turnover in excess of circa £60k!

Also to note, your happy to accept EIS but not complete your tax returns? LOL!

Techcrunch, is this the best article you could find?

There are many things that annoy me about the UK government’s approach to small businesses (having us manage the Working Family Tax Credit, requiring insurance for two man shops where both men are directors and shareholders, etc), but the ones you picked are not ones I have an issue with.

VAT is, in fact, one area where I think the Labour government has made good on its statements about reducing red tape with the introduction of its flat rate tax scheme for businesses generating less than, I think, £150,000.

I just discovered that in Austria, you need to have €35,000 just to start a company (half in cash, half as a liability). It made be profoundly grateful to be operating in the UK.

Stay out of the way? Yes. Make it easier to file online? Yes.

But I’m really not sure I agree with you on many of your “Byzantine” allegations (and I’m one who generally moans about red-tape).

+1 to everyone who has pointed out that the UK is *way* easier to do business in than most other countries.

And complaining about being pestered for your Annual Return (“363″) looks amateurish. Revealing who your shareholders are is part of the bargain you strike when you incorporate. Your company gets limited liability, but in return anyone dealing with your company has a right to know who the shareholders are. That’s the deal.

At least there’s some good come from this post – there’s some great constructive advice in the replies.

Hey guys, great discussion — sorry i have been quiet, been in a workshop all day.

One of the things that entrepreneurs do is look at the world and say ‘How can this be different?’ ‘How can this be better?’ ‘Does it have to be this way?’

If we didn’t then things don’t change.
Alicia doesn’t change the way publishers manage affiliate networks. Layar doesn’t create new ways of interacting with the world. ERPLY doesn’t provide better ways of addressing the accounting and inventory management.

Listen to Jonathan Ive when he presents on design and why they worry about pushing the glass right to the edge of the screen. It’s a little thing, but it matters.

Yes–much of this stuff is easy, but it is not as easy, as say, writing a blog post. It is not as easy as it could be. And it doesn’t make sense for companies of this type–if you were a great designer, you wouldn’t design it that way.

The point is that the little things get in the way.

And we can completely see why systems were what they were, maybe. But are they appropriate?

Do they help or do they hinder? And (as Don Dodge wrote about Google’s goals), should our aspirations be limited to not wanting to change systems and accepting the status quo? Or should we challenge the irritations in our midst?

Comparisons to other countries are irrelevant.
The question is: do you want to improve this?
Can you improve this?

And wider, should your interaction with a Government be so governmental? (See Companies House database and Land Registry, unavailable on the weekends). Why can’t it be better?

So you are you happy with the status quo? Or could you improve it?

A shocking article for me, since we just kicked of our startup in England – for the better, more supporting surrounding.

It didn’t work in Germany at all, bureaucracy and especially tax laws choke you out before you earn the first Cent.

Well, we will see what happens next…

[...] of drinking the Silicon Valley Koolaid and the almost desperate business models that follow. On TechCrunch today there was a good example of this; the company described themselves as “a fast growing tech [...]

Companies House has always been pretty easy to use and its even easier since the new system was implemented in October.

The UK system is generally thought to be superior to other systems in Europe…….so much so that a load of German companies are incorporated here because its about a tenth of the price than doing it in Germany and the compliance is easy.

Basically you had a rant….. about some pretty elementary requirements..

Hey Azeem,

I don’t think any of this has really changed since the days of esouk in the late 90s. Sounds like you’ve just had to go through it all again in the recent startup and have had a nice refresher on the level of help you get.

One of the best lessons we learnt starting solid state group was that we were doing the paperwork ourselves well after the point we needed too. Getting someone in to do all the admin, sending invoices and calling in debt was one of the best moves we made, freeing us up to get on with selling and being creative.

I completely agree with you about the EMI process though. That is so overly complex it’s not funny. There is a massive gap in the market for a cheat sheet website for those EMI applications. Not fun.

Cheers,

M@.

Head to the Valley!

Status quo is not that bad… seriously. There are MUCH more important things to worry about or improve if you are really serious about entrepreneurship.

BTW, workshop?!! WTF?!

What they said. Diddums! If your company ends up in the deadpool, I can assure you it won’t be down to the “friction” of having to do a VAT return once a quarter.

The worst part of a singularly fatuous post was the bashing that the UK universities get. They’re all that bad? Will be a bit of a surprise to the consistently excellent UK-educated people I talk to and work with every day, and the large number of same who read this board.

Although perhaps standards are on the slide, if a graduate who boasts of his “tangential” Oxford degree finds basic corporate paperwork too much of a strain. I suspect he also nodded off over the crumpets in the Logic tutorial. Banking crash? Not enough regulation to protect the investor and the taxpayer! EIS slightly inconvenient? Too much regulation to, er, protect the investor and the taxpayer! Plenty of excellent management courses in (state-funded) institutions, if you’re struggling, and you might also learn that outcomes for tech companies are in no way “binary”.

The sad thing is there’s a germ of a valid idea in there somewhere. Is the government working towards optimum structures to ensure that capital is available and allocated to the best startups? In other words, are they addressing market failures, or compounding them? Is EFG delivering results on the ground?

TC Europe (as opposed to the main site) is consistently pisspoor when they stray from simple facts and onto Op-Ed, but this is the worst yet. Come on, Mike, would it really be that hard to get someone who genuinely knows something about business and enterprise to post on these topics? In the meantime, I’m off to read Mashable – it’s the bloody Harvard Business Review in comparison.

[...] not sure why, but TechCrunch thought this blog post was worthy enough to make it as a guest post. Azeem Azhar, the author, who I don’t know, [...]

Company support – So *you* choose to become a limited company and you have an issue filling in the forms…

Taxation: – So *you* choose to be VAT registered and your bitching about the forms, in the US you have a 300 odd page form to fill in you you’re a person working for a company. How large is your HMRC form? How large is the VAT return form.. what 10 boxes between them?

EIS: – Again you don’t *need* to fill anything out… if it’s not worth you doing so don’t

Enterprise finance guarantee – And that the governments fault is it?

When A VC from London wrote a piece about how lazy UK start-ups where compared to the Valley I thought he was over egging things, but maybe that’s because I work 8 hrs in a job I hate to support my family while spending the rest of the time (app 5hr per night give or take, before I collapse ) trying to start a micro ISV it might come to nothing but it won’t be the fault of red tape, it will be down to me (My money’s on my spelling letting me down).

Reading this, you used a guest piece in a high profile blog, not to push your company by highlighting the problem your company was selling a solution to but to have a go at something you can’t change, makes me despair! Techcrunch, there must be lots of great UK based company out there, please pick one (someone from the comments above maybe) who will show us all in a good light, and not a moaner.

P.S. Please Don’t pick me, I’m rubbish at writing (but pushing myself to get better).

Workshop = figuring out a new interface between or machine learning and web dev teams. meeting. stand up call it what you will

actually i wrote it on my blog originally, which is read by 12 people.
Mike saw it and asked if he could run it here. and i said fine.
you should ask Mike why he thought it was appropriate.

Fair enough then I take what I said about you not using the post to push your company, that said I stand by everything else in my comment.
It UK isn’t a hard place to start a company and much of the red tape you talk of is due to decisions you’ve taken (like becoming a limited company or becoming VAT registered) you don’t have to take throes steps.

http://www.samgambayard-c-m.com/

I think you guys shouldn’t go hard on Azeem. The main point he was making really is that the “UI” experience of setting up a company could be so much better.

I agree with Mike on this one actually; while we can argue whether Azeem is right to complain about this or that return (and I agree that VAT is pretty easy, while agree with Azeem that EMI is a pain in the butt) we should consider why governments are unable to achieve great user experiences in the same way that some other commercial services do.

Just consider, for a moment, if they did.

I also know from experience that the UK certainly IS one of the best places in Europe and beyond, to set up and run an enterprise. That does not mean to say it cannot be drastically improved upon.

Lastly, my own rant – one simple change recently demonstrates why things can be a step back. The forms for share holding assignments to file at companies house have recently become vastly more complex – why? Yes you can file one online, but not -for example- but not if the shares have different values with in the same class (or something, I cant remember the details and cant be bothered to go and check) … again the point is, yes you can outsource it but all these docs and government checks and balances add up. When you’re desperate to keep your burn low, why should you have to spend hundreds more likely thousands a year disproportionately even to SMEs turning over 1000 times more money. It probably doesn’t even make financial sense to the government itself.

Flat rate VAT schemes etc are a step in the right direction – but without criticism we risk taking steps back, or not marching forward at ever greater speed…

This whole discussion makes me happy. Since it gives me the safe feeling I did the right thing to move to the U.K. for our start-up.

Seriously – things you complain about are NORMAL in Germany. For example you would not even start planning of any business without a tax consultant – and it´s perfectly normal to pay some thousand Euro per year for just getting along with the normal tax duties.

I’d tend to agree with you Alex; having set up businesses or subsidiaries over much of Europe (haven’t tried the US yet), the UK is startlingly easy, and startlingly cheap in comparison. Azeem complaints about filling in a 363s (that’s the annual return of shareholders); you do this once per year, it’s the only “company” form that needs to be filled in annually, you can do it online, and if your shareholders etc. have not changed, it’s simply a question of pressing “no change”.

EIS does indeed require hoops to jump through, but it’s optional, it’s a generous scheme (so you would expect some due diligence), and HMRC’s small companies enterprise centre (who deal with EIS and EMI too) are one of the few parts of HMRC that are genuinely helpful.

There are problem areas though. Not only is it ridiculously hard to open a bank account, it is almost impossible to open one at a bank which will give you anything like a decent service (and just forget borrowing money). And if you’d like your business to take money over the internet, that will require a merchant account; I know of one business whose bank will not provide one until their customers have demonstrated two years of successful trading (harder, if they are unable to take cash).

And whilst VAT returns are processed OK, registering for VAT has been a nightmare every time I have tried it. The last time required me to send around 150 sheets of A4 to HMRC (this is for a start up, and yes, I counted), as they do enjoy losing everything, claiming you haven’t answered questions they didn’t ask, etc.

But compared to every other jurisdiction I’ve tried, it’s positively easy.

[...] IPOs and is now Entrepreneur in Residence at Judge Business School. Below, he answers our recent guest post which attacked the way UK business regulation authorities treat small but fast-moving startup [...]

i don’t blame you at all. i always feel the same way.

you look so cute

[...] IPOs and is now Entrepreneur in Residence at Judge Business School. Below, he answers our recent guest post which attacked the way UK business regulation authorities treat small but fast-moving startup [...]

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