Small Business

Government Regulations for Business in the UK

Regulations Seek to Ensure That Businesses Follow Certain Codes and Pay Their Dues.

Government regulations for business in UK are concerned with formation, taxation, employment of people, health & safety, protection of intellectual property, licensing risky businesses and protection of individual privacy. You might need a business lawyer for going into details. However, an overall awareness can help you decide when to seek such assistance.

Formation of a Business

You can establish your business in the forms of Sole Trader, Partnership, Limited Liability Partnership or Limited Company. The last two forms seek to limit the liability of owners for business debts. In these cases the business must register itself with Companies House and also make important information about the business and its owners available to the public.

The Sole Trader and Partnership forms of business are simpler to form, and need not publish their business information. However, the owners would be personally liable for all business debts. One partner can even incur business debts that might sometimes have to be paid by other partners.

The limited liability forms of organisations also need to select and register a name at the time of formation.

Fuller details are available at

Income Tax and National Insurance

Income taxes and national insurance are computed on income, VAT on turnover and local rates on property values.

Businesses pay tax and insurance on their profits. Profits are computed by deducting allowable expenses from income. There are strict rules regarding which expenses are allowable and which not. Generally, business expenses are allowable and personal expenses are not. Some kinds of business expenses might not be allowed, however.

Cost of long term business assets are not considered expenses. However, you can deduct a capital allowance from the profits, and need pay tax only on the balance. Capital allowance is computed as a percentage of the asset cost, and the exact amount depends on the nature of the asset.

You pay tax on any income above your personal allowance while companies pay corporation tax on their profits. If you are self-employed, it is your responsibility to pay tax and national insurance. If you are an employee, it is the responsibility of the employer to deduct tax and insurance from your salary and pay it to the government.

Returns have to be filed showing income and computation of tax thereon. You can get full details of tax and national insurance matters at

VAT or Value Added Tax

One confusing set of government regulations for business in UK could be those related to VAT. Value Added Tax (VAT) is collected by businesses on sales and paid by them on their purchases. If their collections exceed what they paid, businesses have to pay the difference to the Customs and Excise department. If they have paid more VAT than they collected, the excess can be claimed from the department.

Only those businesses whose turnover exceed VAT registration threshold need register, and only registered businesses can collect VAT on their sales. Unregistered businesses cannot claim refund of the VAT paid by them. To avoid this predicament, even those businesses below registration threshold could register.

There are four rates of VAT depending on the nature of the goods or service – 17.5 per cent, 5 per cent, Zero per cent and Exempt. If you are dealing in exempt goods, you might not be able to claim refund of VAT paid by you.

Maintaining proper records is very important. All invoices and receipts must also show your VAT registration number and also the VAT collected by you. VAT collections and payments must be separately accounted in the books. Returns showing collections and payments must be sent to Customs and Excise at fixed intervals.

You can get fuller details about VAT at VAT page of HM Revenue & Customs – hmrc – website.

Government Regulations on Employment

Governments protect employees through employment legislation. It starts from the recruitment stage itself. You cannot discriminate on grounds of sex, race, ethnic origin or disability while selecting employees. Candidates can even ask to see the interview notes you made.

Selected employees must be given a statement in writing setting out the main terms and conditions of employment – job title, pay, holidays, place and hours of work. Some of these can be in an employee handbook easily accessible to them. Changes cannot be made in these terms without the employee’s consent.

Employees are entitled to different kinds of leave including annual leave, sick leave, maternity and paternity leave. Lengths of working hours and working weeks are also regulated. Special provisions must be made for disabled employees.

Employees must be made aware of standards of conduct at work and what kinds of behaviour are unacceptable. They must also know how to bring up any grievances. A fair procedure must be in place for taking disciplinary action, with opportunities being provided to employees to tell their side of the story.

Unfair dismissals and redundancies can be challenged by the employee. Dismissals for joining a union, enforcing their rights, or on grounds of pregnancy are some examples considered unfair.

You can learn about the best practices in dealing with employees at

Health and Safety Regulations

Regulations on health and safety in UK are somewhat elaborate. These deal not only with the safety of employees and visitors but also the impact of your business on the public. You have to assess the risks and take action to minimise them.

Fire risks, waste disposal, environmental concerns, storage and handling of hazardous goods, workplace standards and enabling access for disabled persons are all covered under these government regulations. Information on relevant rules, including free booklets, are available at web site.

Details of any serious injuries, diseases or dangerous incidents must be recorded in an accident book. Some of the incidents might also have to be reported to Health and Safety Executive.

Insurance against losses, and against claims by employees, is an essential element of good business strategy.

Intellectual Property

Government regulations for business in UK also seek to protect your intellectual property. For example, if you have established a reputation for quality, and if a competitor uses your business name (or a similar name) for doing the same kind of business, you could argue that the competitor is falsely passing of their goods as yours.

Trade marks, patents, copyrights and even unique outward shapes can be protected under government regulations for business in UK. You can visit for fuller details.

Licensing Requirements

Under government regulations for business in UK, certain types of businesses need to register with different authorities and/or obtain licences. Examples are selling alcohol, public entertainment, massage and skin piercing, education and healthcare. If you sell food, you have to observe hygiene rules that seek to ensure the food is safe to eat.

Carriage of goods and people is another example. In this case the licensing details differ depending on the nature of goods, transport capacity and certain other factors.

Privacy and Data Protection

Privacy laws protect individual privacy and personal data. Only the minimum necessary data must be collected and these must be maintained under tight security. Collected data must be kept only so long as is necessary.

The data must be accurate, and must be given to affected persons if they ask for it. Sensitive information such as personal beliefs and sexual life must be collected only with the free consent of the individual. The data must be processed fairly and lawfully and only for the intended purposes.

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