Located in Guildford, Surrey, Chaco Limited specialises in sourcing non-bank funding for UK housing associations. Over three recent years of intensive auditing, the company took steps to ensure that it was working in full compliance with appropriate regulations – but has found that most of the policies it has taken on board stem from supply chain, rather than statutory, pressures.

“Other than Companies House and HMRC, we are not regulated by anyone. But we are increasingly caught by what we may call indirect regulation,” says Director and chartered accountant Ian Blelloch.

Indeed, Chaco’s coverage includes commitments to adhere to anti-slavery, anti-bribery and anti-tax-evasion behaviours – which the company upholds alongside policies around data protection, sustainability, conflicts of interest and confidentiality. In addition, it maintains a code of ethics and a diversity and inclusion (D&I) statement of intent. So, in the absence of statutory pressure, what has prompted all those measures?

“Our clients,” Blelloch says. “All of our clients are real estate investment funds and they are looking to people in their supply chains to abide by the standards that they themselves observe.”

Adapt and adopt

Blelloch explains: “We’ve been working in this sector since 1993, but the need for this level of coverage wasn’t really brought home to us until property investment firm CBRE asked us in 2017 to help them set up an affordable housing property authorised investment fund.”

As part of that relationship, CBRE required Chaco to have a compliance visit. “For a five-person team, the information that came out of that visit, in terms of what we had to adopt, was at first quite mind-boggling.”

Despite that initial reaction, Blelloch and his staff carried out some online research and were able to find examples of policy documents with wording that fell broadly in line with what was expected from housing associations – Chaco’s nearest sectoral equivalents. The company then adapted the policies to fit its own business model.

“These are areas where we haven’t been told by central government to take action,” Blelloch says. “But making such efforts is increasingly characteristic of the industry in which we work. And what those policies do is force you to take a critical look at your business every so often, which is ultimately quite helpful.”

Looking at the statutory regulations that Chaco is obliged to honour through HMRC and Companies House, Blelloch is broadly happy with the workings of the corporation tax, VAT and PAYE systems. However, he points out: “What has been the absolute bane of my life over the past two years is the workplace pension scheme.”

Inflexible system

With more than 10 million people enrolled, the government sees the workplace pension as a highly successful programme. But Chaco’s experience of the initiative forced Blelloch to write to his MP.

He explains: “The way it’s set up actually penalises companies that look after their workers. All our staff were already in non-contributory pension schemes, and none had expressed a wish to join the workplace pension. But the first I heard of it was a letter from The Pensions Regulator and scheme provider The People’s Pension telling me that Chaco was in breach of pension regulations. No heads-up, no grace period to adjust – nothing.”

Blelloch was unable to discuss specific employees’ pension plans with The People’s Pension because of confidentiality rules – so he had to work through the awkward process of speaking to his staff one by one to ask them whether they wanted to be auto-enrolled. As the answer was a unanimous no, he then had to ask them to contact The People’s Pension individually to opt out of the scheme.

“The People’s Pension could have quite easily picked up the phone to our accountants and asked the question,” Blelloch says. “As it stands, once we all opted out, we had to chase them for rebates of pension contributions that we never wanted to go their way in the first place. But even though those sums of money came back to us, we were still fined. And to cap it all, in three years’ time, we’ll all have to opt out again. It’s a robotic, inflexible system that was clearly designed by people who have no experience of running companies.”

High credibility

Based on his experience of contacting his MP – together with his membership of ICAEW – Blelloch is confident that SMEs have a tangible voice with central government when communicating their thoughts on the regulations that affect them.

“On the whole, the democratic system works well,” he says. “I’ve contacted my MP on a few occasions, and you always get a response – which, for me, is very valuable. Then there are opportunities to take part in round-table discussions with the Bank of England – and at the same time, ICAEW has a high level of credibility with the government. As deputy-president of the Thames Valley region, I’m impressed with how the Institute maintains strong links with business people on the ground to pick up a range of contrasting, localised opinions, which help it to formulate its own policies on different regulations.”

A key part of ICAEW’s credibility, he notes, is its letters of qualification. “When you become a chartered accountant, you join a wide cross-section of society with a highly regarded cachet, irrespective of race or gender. Plus, through initiatives such as Access Accountancy, the profession is also working to bring in more people from disadvantaged backgrounds. That all feeds into a vast pool of potential feedback from motivated, diverse and insightful members. So, if their response to a regulatory proposal is particularly negative, that will at least enable ICAEW to flag up major concerns to government before the relevant legislation is passed.”

Turning to what government could do better in its development of regulation, Blelloch takes the view that new sets of rules should be as decentralised as possible.

“If you look at something like VAT,” he says, “before we get into the minutiae of how it works in different sectors, it’s conceptually very simple. And that should be the aim: conceptually simple rules that people can then figure out how best to implement themselves. We should steer away from centrally imposed, top-down regulation, as opposed to regulation based on regional views. And if you really need a national policy, take all those views into a melting pot, give civil servants the chance to collate that feedback, then modify the policy and re-consult with those it will affect the most.

“What we need are systems of well-informed regulation.”