Let’s be straight, there’s a massive stigma about utilising loopholes in systems, regulations and statutes. The perception is that businesses finding ways to make the most of conditions are in some way doing the wrong thing. While there is a point where structures and classifications can mean some businesses benefit greatly from their ability to sit just outside a wide array of rules, my stance is that the onus is not on the private sector to place themselves within conditions they are legitimately able to sit outside of. They are, after all, there to make money – the more they make the more they expand, and the more people they employ and supply to.
Any legal requirement should be definitive. Grey areas in legislation or regulations mean poor drafting, to me that’s the end of it. If the legislature or regulators haven’t been diligent enough to close loopholes that is their problem to fix. It isn’t the responsibility of those the instrument is meant to affect to “opt-in”. It’s the same as in business, if my product isn’t good enough or doesn’t work as it should it isn’t the responsibility of my customers to say “I know I don’t need to, but I’ll use this anyway”. It’s about quality control, skill and talent. Everyone makes mistakes, and any piece of work will undergo revisions and be updated as time passes, but if it doesn’t work it needs to be fixed.
My message to those creating the instruments, regulations, legistaion and any other “rules” applying to business:
Don’t complain when your work doesn’t achieve what you wanted it to. Do what the rest of us have to when we make a mistake – become better at what you do and fix it. It’s not our fault – responsibility for it lies with you.
On the other side though, as a business you should be looking for ways you can increase your efficiency, wherever they lie. You should look for loopholes relevant to you to, across the board.
It could be R&D benefits, advantages of particular structures, the way you class your product, or even where you’re located.
I’m not saying it is ok to break the rules. But placing yourself outside them can create a far better environment for your business to operate in. Your accountant and legal advice should be able to help you, and advise if what you want to do is the best way to go, but remember – you know your business, it’s up to you to be creative and look for opportunities.
I should state here very clearly – I’m NOT talking about EVASION techniques. There is a big difference between it and MINIMISATION, which is simply good sense and good business. Paying more for anything (especially things you get no return on), just because, is not going to get you ahead as quickly as you should.
So, how can you find the loopholes relevant to you, and reduce your operating costs at the same time? There are four things I look for:
How is your business set up? What is your status, your conditions and reporting periods? Are your team employees, contractors, affiliates – and what would work best for both of you?
A really good accountant is a great place to start here (I mean the good part, I’ve had some which have turned out to be unable to do what they say, and I’m still paying for it). My biggest tip is to set up properly for where you want to end up from the beginning, otherwise you will end up paying over and over again for restructures.
Market and Customers
What, where and who? Look at what your business really does and where it sells most. The way you sell to your customers (franchise, retail, direct, online, subscription) can drastically change your obligations, and costs. Do your research, work out what your customers want and how they want to buy, compare it to what it will cost you and find the best fit. As always, don’t shy away from being creative with how you sell!
The way your product is classed can make a huge difference to the regulations it has to adhere to, especially in electronics. Your product features may add more cost than they will return, by changing the classification of the product.
Manufacturing all components yourself can also add extra costs – if there are parts you can buy and incorporate you may be able to save a lot by leaving compliance to their manufacturer and obtaining a licence for its use with the purchase.
It’s important to know your product – it could save you a lot of time and money.
This is a big one for companies doing their own research and development. Make sure you know the timeframes and limitations on any work or expenses you have, in terms of making the maximum claim you can on them.
Sometimes this means carrying expenses for longer before claiming, so you meet thresholds, sometimes it means quickly shifting them and reclassifying. It might also mean you have to complete a specific task within a time frame to be eligible.
Do your research and find the timeframes relevant to you – use them to set your deadlines, there’s nothing like money to provide incentive to complete.
Loopholes aren’t bad. They can help build a business, especicially in its early stages.
As a business you should be looking for them. If a rule doesn’t apply to you, you’re not doing anything wrong by not abiding by it.
Regulators – stop complaining about business not opting in to your rules when they don’t have to. Do a better job, and regulate fairly and we’ll comply.