Guest Post: UK startup rules aren't perfect, but we're getting there

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Alex van Someren is a “Dealmaker” with the Global Entrepreneur Programme at the department of UK Trade and Investment. A serial entrepreneur specialising in IT software and hardware product development businesses, he’s had two exits through 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 businesses in the same way as regular, slow-moving ones.

Azeem Azhar’s article about UK small business bureaucracy doesn’t tally with my own experience running businesses in the UK. In fact, from what other entrepreneurs are telling me it’s a lot easier here than in most developed countries.

I wonder whether he’s tried starting a company anywhere else in the world? Just this past Monday I was listening to a guy complain to the Prime Minister at a conference that he’d been to the USA for three weeks and during that time he still hadn’t managed to get a trading subsidiary incorporated there. I’ve done it myself in an afternoon in England.

At this point I must declare an interest, because nowadays I work part-time for Her Majesty’s Government as a Dealmaker for the UKTI Global Entrepreneur Programme – supporting start-ups and helping to get more of them to relocate their headquarters to the UK. In my former life I was a serial entrepreneur: since age 19 I’ve grown four businesses in the UK, from being a self-employed Sole Trader, through two small VAT-registered Limited companies, to a full IPO of a London Stock Exchange-listed PLC. I like to think this makes me better informed, rather than just biased, and of course I’m writing in my own personal capacity here.

My view is that running a business is mainly about overcoming obstacles. Obviously, it would be nice if there were fewer obstacles. Most of the time, it’s true, we have better things to do like polish our products, locate more customers, negotiate with partners etc. But the reason there is government paperwork often has to do with enjoying special perks.

If you want limited liability, so you aren’t personally at risk for a business failure, then you have to file accounts and directorship forms at Companies House.

If you want to enjoy the autonomy and tax advantages of being able to recover VAT and offset expenses against profits, then you have to provide some supporting information every quarter, all of it online nowadays.

If you want to enjoy the really spectacular perks, like tax breaks for capital gains (e.g. the EIS scheme), or tax-free share options (e.g. the EMI scheme), then I think it’s pretty reasonable that you have to fill in a few fairly complex forms, and take the time to get them right, and file them.

By the way Azeem: they pay me my VAT by direct bank transfer, so you might want to spend a few more minutes on that HMRC website.

So, is everything perfect? Of course not – in particular, small business banking is in a total mess. It’s shockingly complicated to open a bank account here, and the bank’s cowardly culture means that Anti-Money Laundering regulations and the Data Protection Act are held up as excuses for all manner of obstruction and bureaucracy.

As for debt-based borrowing it’s laughably difficult right now, despite the Enterprise Finance Guarantee scheme (which is actually supposed to ensure that the Bank doesn’t even bear the risk if the loan goes bad). Azeem and I are in total agreement about this; even if he did misattribute the quote from Star Wars to Carrie Fisher (it was actually Harrison Ford).

So, can we remove more obstacles and make things even simpler for start-ups? Well, we’ve made a fair amount of progress with online filing of Tax and VAT returns. It’s true that the HMRC website user interface experience plumbs the depths of Government website design (which were already pretty deep), so there’s another thing Azeem and I agree about.

Now we’re starting to hear that politicians from both parties are getting the message about improving transparency of Government, from Gordon Brown adopting Sir Tim Berners-Lee’s open data proposals to David Cameron promising the TED conference that every Government contract over £25,000 would be up on a website for all to see, if he was elected. If this trend continues, we’re facing the real prospect of being able to interact with our bureaucratic machinery in real-time over RSS, XML and HTTP. That sounds pretty slick and Web 2.0 to me.

I spend some of my time working with entrepreneurs from overseas who are thinking about moving their companies to the UK. They don’t have a totally smooth ride: banks are useless in new and interesting ways; visas have been a problem for some; new procedures are a pain, and of course they feel like a distraction.

But business is all about overcoming obstacles, and the obstacles in the UK are generally a lot smaller than elsewhere. The people who are really going to succeed as entrepreneurs are the ones who understand this and just deal with it.

Then they can get back to running their businesses, and enjoying the proceeds.

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