insight - spring 2013
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News and comment from HW Fisher & CompanyTRANSCRIPT
News and comment from HW Fisher & Company
Bank of Mum and Dad - we look at the importance of financial planning
Budget 2013 - an analysis of the changes
Celebrating 80 years - a history of the firm
InsightSpring/Summer 2013
801933-2013
CELEBRATING
YEARS
Bank of Mum and Dad
Since the economic crisis began, tougher lending criteria and higher deposit requirements have led to increasing numbers calling on The Bank of Mum and Dad for help. This accommodating source of funds can help children in numerous ways – from topping up a deposit to reducing borrowing rates.
An emotional quandaryHowever, as the bleak economic outlook worsens, parents today are faced with a multitude of monetary issues themselves, including; rising living costs; diminishing pension pots; and the prospect of ultra-low annuity rates.
These pressures along with the natural desire to assist their offspring are putting many mums and dads into an impossible situation.
Over the years, we have seen a number of cases where parents have ‘overgifted’ and have found themselves financially vulnerable later on in life.
Planning is imperativeIncreased life expectancies mean that financial planning is crucial to ensure quality of life.
the prospect of aiding a deposit for a first house is a huge challenge - even for wealthier families.
In some cases, people may have left these decisions too late, but for parents whose children are still relatively young they at least have time on their side.
This is certainly key. Even now university fees can be up to £9,000 per year and this is likely to increase in future years’ time. The addition of university rent, everyday living costs and the prospect of aiding a deposit for a first house is a huge challenge – even for wealthier families.
To avoid financial pitfalls further down the road, parents should start saving and the sooner, the better.
Where do you start? The key is to try and determine exactly how much will be required and work back from there.
It may be that it is not financially viable to cover three years of university fees, but you may be able to fund one year of tuition or living costs or rent. It is important to strike a balance to ensure that your targets are realistic.
Once you have a ‘number’, how and where you invest to meet that number should always reflect your risk profile. With this in mind it is worth seeking the advice of an independent financial adviser to ensure you are in the correct type of investment vehicle.
Ideally, this vehicle will be tax-efficient. A Junior ISA, for example, enables parents to invest £3600 a year tax-efficiently for their children.
A parental guaranteeFor parents who are being approached right now by their children for support during university or a deposit, all is not lost.
If you simply have not got the funds to lend to your children, it may be that you could support them in other ways.
Many parents, for example, can help to get their children onto the property ladder by acting as a ‘guarantor’ of their mortgage payments — a number of lenders currently have guarantor mortgages in place.
One or two high street banks are also offering schemes where the applicant is only required to place a small deposit of approximately 5%, with the parents placing 20% of the value of the property into a savings account with that lender as a guarantee (effectively making a 75% loan-to-value mortgage). The savings still gain interest but act as a safety net for the lender should prices fall.
In both cases, of course, this is placing the risk firmly onto the parents and may even affect their own ability to apply for credit, but it is a way to avoid immediate cashflow problems.
In some cases, asset rich, cash poor parents are even resorting to downsizing or equity release in order to free up funds for deposits or university fees. In the case of equity release, which in most cases should be avoided, it is especially important to seek advice first.
And while parents will be uncomfortable with the idea of their child taking on debt to pay their way through higher education, bear in mind that student loans are a much cheaper way to borrow than a standard personal loan, or even a remortgage.
Also, your child will not have to start repaying the loan until he or she starts earning over an annual income threshold.
Parents can help to get their children onto the property ladder by acting as a ‘guarantor’ of their mortgage payments
Originally coined as a joke, the term ‘The Bank of Mum and Dad’ now has a financial connotation that is very much a reality.
www.hwfisher.co.uk2 | Insight
Insight
Grandparents and giftsOften, of course, grandparents also want to contribute to their grandchildren’s education or property deposit.
Not only are they helping their grandchildren but they will also be mitigating their inheritance tax (IHT) liability, where anything in their estate over the nil-rate band (currently £325,000) could be taxed at 40%.
Another option for grandparents is to make a gift into a trust, which also allows them to control how and when benefits are paid.
Cultural changeIn this country, there is little doubt that we need to adopt the ‘college fund’ mentality that is prevalent in the United States. Usually, when children are born in America, parents start a college savings account almost immediately to cover the high fees.
It is clear that as people start to live longer and house prices spiral ever more out of reach, strategic financial planning is the key to offsetting a bleak financial future.
In this issue...
Bank of Mum and Dad Budget 2013
Raising equity finance
A life in numbers – Harold Fisher remembered
Finance Bill brings clarity at last
CIOs – a new route for charities
New rules put Members’ Voluntary Liquidations on top
Why HMV survived as a retailer
Sustainability is a civil right
Getting strategic about sustainability
In the spotlight... Matthew Brewster
The role of licensing agents
The future of UK accounting
Auto-enrolment
Accounting for academies – it is far from academic
Outsourcing - taking the pain away and cutting costs
Financial red flags for law firms Why UK Plc still appeals to inward investors Private client insurance – more important than ever
HW Fisher news
Richard Brand, Financial Adviser,
Eos Wealth Management
T 020 7874 1194
Tony Bernstein, Tax Partner
T 020 7380 4977
Facts & Stats
Housing charity, Shelter, says that 1.6m people aged between 20 and 40 are currently living with their parents because they cannot afford to either rent or buy
According to a survey by HSBC, 73% of parents who loan money to their children want interest on it, which ranges from 2.1% to 2.5%
Research from the Council of Mortgage Lenders found that 66% of first time buyers in recent years have had help with their deposits - rising to 72% for those in the capital
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Eos Wealth Management Limited is authorised and regulated by the Financial Conduct Authority (FCA).
Any tax reliefs or legislation mentioned are those currently available or in force and are subject to change.
You should remember that the capital value and income from investments can go down as well as up
and is not guaranteed. Past performance is not a guarantee of future returns; it is merely a guide to the
investment strategy of the underlying fund. It is important to periodically review your investment to
ensure that the investment continues to meet your objectives. Content and information about potential
investments are designed for general use and so cannot be considered personal to your circumstances
or your financial position. Your home may be repossessed if you do not keep up repayments on your
mortgage. The FCA does not regulate tax or trust planning.
www.hwfisher.co.uk Insight | 3
Budget
Notwithstanding the fact that the finer details were all over Twitter before he even stood up, thanks to an inadvertent tweet at the Evening Standard, the Chancellor’s ‘Aspiration Nation’ Budget, overall, was relatively positive, especially for business. Although, the growth forecast for 2013 was cut in half, from 1.2% to 0.6%, and the Chancellor announced that government borrowing would actually rise this year, to £114bn, but then bad macro-economic news these days is in the price.
Headline announcementsThe headline announcements of Budget 2013 included the rise in the personal allowance to £9,440 for the current tax year and — more importantly — that the increase to the symbolic £10,000 has been brought forward by a year, to 2014. This was always on the cards given that it is a cornerstone Liberal Democrat policy but for lower income earners, in particular, it is a very welcome step.
Likewise, the cut in corporation tax to 20% as of 1 April 2015 was not entirely unexpected but will be welcomed by business. There is still an argument that small companies should not be paying corporate tax at the same rate as large companies but this cut is a step in the right direction and will certainly make the UK more attractive to overseas businesses.
UK businesses will also benefit from the new Employment Allowance, which will cut employers’ national insurance bills by up to £2,000 from April 2014. Again, this is another welcome first step in lowering the cost of employment, specifically for small firms.
Help to Buy initiative By far the most controversial area of the Budget was the launch of the new Help to Buy initiative, specifically the mortgage guarantee element that will enable people with small deposits, of 5% say, to get onto the property ladder.
Effectively, Help to Buy will see the UK taxpayer underwrite higher loan-to-value (LTV) borrowers purchasing properties valued at up to £600,000. It’s hard to deny that this is a bold step.
Inevitably, the very same people who have been calling for banks to start lending again at higher LTVs came out to say that this scheme, which might actually work, has a high risk of creating another sub-prime property bubble.
There was also great concern that the Help to Buy scheme could help second homeowners to buy, although the Government, in the immediate aftermath of the Budget, was umming and aaahing on this point, saying it is highly unlikely.
2013
4 | Insight www.hwfisher.co.uk
Toby Ryland, Corporate Tax Partner
T 020 7874 7959
Other points of note
Abolition of stamp duty on AIM shares: The investment community has been asking the Government for help to encourage growth markets and the abolition of stamp duty on shares traded on markets such as AIM will be welcomed by both investors and businesses seeking to raise finance. This could further stimulate transactions that have been lacking in the past five years.
CGT relief on sale of businesses to employees: While this measure is aimed at encouraging employee participation, in many cases it will only represent a 10% tax saving. However, it does provide an incentive for owners to consider selling businesses to their workforces. This is ultimately about encouraging more management buy-outs and allowing smoother succession planning.
Seed EIS scheme: The extension of the CGT exemption under the Seed EIS scheme is good news, although we would have preferred to see the maximum investment level increased. As long as the limits remain low, this will have only a relatively minor impact on entrepreneurial activity.
R&D tax credits: The increase of the above-the-line tax credit to 10% will be welcomed by UK business and will be a further incentive for larger companies to invest in innovation, especially alongside the reduction of corporate tax rates. This will make the UK attractive to inward investors.
State-subsidised mortgages for the wealthy? That door will surely be shut. One door that might be opening, however, is the possibility that unused commercial property on the high street that is converted to residential use could be placed into self-invested personal pensions. This is only being explored at the current time but is one to watch and could be a major development down the line.
Missed opportunity?
Parents can receive support worth up to £1,200 a year per child
Elsewhere, the current Childcare Voucher scheme has provided little support to many working parents, particularly as a basic rate taxpayer receives a saving of only around £900 per year, with higher earners receiving substantially less.
The Chancellor therefore announced a new Childcare Scheme in the Budget, intended to address the difficulties faced by working parents. On the face of it, the new Childcare Scheme looks much better.
Parents can receive support worth up to £1,200 a year per child, a substantial improvement over the existing scheme, which provides a single saving regardless of the number of children requiring childcare. The major disappointment is that, not only will parents have to wait for two and a half years before the new Childcare Scheme comes into effect, but it will initially be restricted only to those working parents whose children are under five years of age.
This leaves the parents of school age children in the current Childcare Voucher scheme, which is substantially less generous. Overall, what should have been a welcome boost for working parents will not benefit the majority of parents who need help now.
Despite some positive developments in the 2013 Budget, this, in particular, was a missed opportunity by the Chancellor.
www.hwfisher.co.uk Insight | 5
Carolyn Hazard, Director
Fisher Corporate Plc
T 020 7380 4901
Raising equity finance - are you aware of the regulations?
If you are thinking of sending out a business plan or information memorandum to potential investors, you may be in danger of breaching Financial Services Law and face prosecution.
Fisher Corporate Plc is authorised and regulated by the Financial Conduct Authority under reference 193921.
How can we help?
Most importantly we can help you comply with the legislation.
We can advise you of any exemptions available.
We can help you draft a financial promotion which complies with FSMA guidance.
Any approach to potential investors residing in the UK is governed by the Financial Services & Markets Act 2000 (FSMA). Raising equity finance is a complex regulatory area. You should be aware of the need to take professional advice during the process. In particular, sending a business plan or similar to, or discussing it with, potential investors will constitute a financial promotion and this may require you or other persons involved in the process to be authorised or regulated by the Financial Conduct Authority (FCA) here in the UK.
What is the FSMA? The FSMA contains legislation which determines what investments you can promote and how you can promote them. The law seeks to protect inexperienced investors from receiving investment proposals that they might not understand or which might involve risks that they do not understand.
The FCA oversees the financial services sector and regulates the provision of financial services and markets. You may therefore think that this legislation applies only to those individuals and firms authorised and regulated by the FCA BUT YOU WOULD BE WRONG. The FCA has powers not only to punish authorised persons within its own regulatory framework, but also has the authority to PROSECUTE ANYONE WHO COMMITS OFFENCES UNDER THE FSMA.
Next stepsWe therefore recommend that you speak with Fisher Corporate before communicating any financial promotions to anyone.
Fisher Corporate is authorised and regulated by the FCA and can therefore approve financial promotions under Section 21 of the FSMA.
Additionally Fisher Corporate is able to advise if any relevant financial promotion exemption might be available to you and accordingly can assist with drafting a financial promotion that will comply with the FSMA or Financial Promotions Order, to take advantage of any such exemptions.
www.hwfisher.co.uk6 | Insight
With a sharp mind and the uncanny ability to spot an error in a set of accounts at a mere glance, Harold Fisher was a hugely talented accountant.
But our firm’s founder was also living proof that accountants can have a creative side too. He was a fine amateur cartoonist and created many portraits, including one of his most recognisable clients, the former PM Harold Wilson.
He repaired guitars as a hobby, and was an authority on Victorian stamps - having one of the foremost collections in the UK.
Those of us who knew him remember his deep and gravelly voice, and his trademark style – always sporting a bow tie and with a pipe clamped between his teeth.
Harold’s journeyThe story of how he founded the firm in 1933 reveals the true measure of the man.
He had qualified as a chartered accountant six years previously, and spent most of the intervening time working as an auditor for the oil company Shell in Venezuela and Trinidad.
Returning to Britain in 1932 to find the economy in the depths of the Depression, he spent several fruitless months looking for a suitable job.
In 1933 he took the bold decision to go it alone – and started his own firm. But soon world events would intervene – this was the year that Hitler came to power in Germany. Harold’s mother had Jewish friends and family in Berlin, and soon he was doing his bit to help them flee the Nazis.
Over the next five years he made frequent visits to Germany, helping countless people leave and immigrate to Britain. Harold’s courage was rewarded, as many of those he helped went on to become clients of his fledgling firm.
His description of the final moments of his last visit to Germany in 1938 reads like a passage from a thriller. At the Franco-German frontier on the River Rhine he was stopped by a Nazi border guard. Harold recalls:
“When I told the official I was carrying five million Reichsmarks of bearer bonds he said in German “mad Englishman!” and passed me through without any kind of examination of my luggage. I walked as slowly as I dared to the middle of the bridge and then quickened my pace until I was safely in French territory. If I had only known how easy it was, I could have smuggled out enough capital to set up half a dozen émigré businesses.”
After the Second World War Harold’s firm went from strength to strength. In 1950 he took on his first partner. Michael Josephs shared Harold’s high standards – Michael came first in the country in the 1946 Accountancy Exams. Now aged 90, he remains a client of the firm.
The firm’s accounts for 1953/54 show that 3 partners generated fees of £14,000 and made £5,000 profit to share between them after paying the running costs and the salaries of 10 staff. Present dayToday, there are 29 partners, 280 staff and the firm is 24th in the accountancy firms league table, with fee income of £23 million.
Harold Fisher passed away in 1986, a portrait showing him resplendent in bow tie and pipe in hand, still hangs proudly in our London office. His passion and precision live on through our staff, and we all strive to serve our clients in a way that would make him proud.
HW Fisher & Company is now in its 80th year. To mark the anniversary, one of the firm’s senior partners, Julian Challis, reflects on the life of the man behind the firm’s name – Harold Wolf Fisher.
Julian Challis, HR Partner
T 020 7380 4969
A life in numbers – Harold Wolf Fisher remembered
801933-2013
CELEBRATING
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www.hwfisher.co.uk Insight | 7
London’s buoyant prime property market continues to be a mouthwatering prospect for overseas investors keen to diversify their assets and preserve their wealth.
With its resilient prices, mature market and seemingly inexhaustible demand, London’s high-end property is seen both as a safe haven and a profitable investment for international high-net worth individuals.
However it is also an equally tempting prospect for the UK Exchequer.
Chancellor George Osborne’s 2012 Budget increased the rate of stamp duty on UK residential property sales worth more than £2million to 7% for individuals and to 15% for non-naturals, i.e. those buying through companies.
Homes over £2mFrom April 2013, some non-natural owners of homes valued at more than £2million will also have to pay a new annual charge, the Annual Residential Property Tax (ARPT). At the same time, those same non-naturals who sell a residential property for more than £2million could also become liable for Capital Gains Tax (CGT) at 28%.
Tax rates for the wealthy is a hugely controversial issue in Britain, and while the Treasury is keen to show that the rich are “paying their fair share”, it is walking a fine line to ensure that these tax hikes do not damage London’s global competitiveness.
From April 2013, some non-natural owners of homes valued at more than £2million will also have to pay a new annual charge, the Annual Residential Property Tax (ARPT) and be exposed to CGT.
With this in mind, the 2013 Finance Bill, the details of which were published in December 2012, introduced a series of reliefs and exceptions to the new taxes.
Who benefits?The Bill, which is set to become law around July 2013, also simplifies and clarifies the tax position for non-natural owners of British residential property – not least by providing a more precise definition of who non-naturals are. They are companies, partnerships with corporate partners and certain collective investment schemes.
The chief beneficiaries of the clarifications will be non-naturals who buy property worth over £2million not to live in, but to rent out. Those non-naturals who let out their property to genuine third parties (family members are excluded) will be exempt from the ARPT – and if they sell the property for a profit, from CGT as well.
Non-naturals are companies, partnerships with corporate partners and certain collective investment schemes.
Non-natural property developers will also be exempted from the APRT and CGT. This exemption was initially to have applied only to property development businesses that had been active for at least two years, but the 2013 Finance Bill removes this qualification period – meaning any new developer can buy a property and enjoy the exemption immediately.
Both these categories of non-naturals will be exempt from APRT and CGT from April 2013 and for purchases by them completed once the bill formally becomes law, around July 2013, from the 15% rate of stamp duty, so will then pay only 7% for greater than £2million residential property purchases.
Finance Bill brings clarity at last
If you are an overseas corporate owner of prime residential property, read on…
Alan Lester, Property Partner
T 020 7380 4979
The Bill also brought some comfort to those non-naturals who will eventually be liable for CGT. The tax will no longer apply to the total gain realised on the sale of a property, but rather just to the gains accruing after 6 April 2013 (or acquisition if later).
The decision not to make CGT retrospective will be welcomed by all investors in high-end UK residential property. The non-natural exemptions from APRT, CGT and the 15% rate of stamp duty will be particularly welcomed by the significant number of overseas investors who buy, or will continue to buy, UK property via an overseas company for rental purposes.
While the new rules are much simpler than first feared, they are still complex and overseas owners of UK residential properties should consider their likely tax exposure now and take advice.
www.hwfisher.co.uk8 | Insight
It allows for simplified registration, reporting, and annual filing as CIOs need only register with the Charities Commission (CC), not with both the CC and Companies House as is currently the case with existing charitable companies limited by guarantee.CIOs offer a simplified constitution, greater flexibility and make it easier to merge and restructure.
Furthermore, the duties of members and trustees are clearly defined and worrying about complying with company law is not an issue. Just over fifty small or medium sized organisations have applied so far, all bar one being a new entity.
CIOs offer a simplified constitution, greater flexibility and make it easier to merge and restructure.
This all sounds very positive, but there are a number of key issues that any organisation should consider before undertaking this. The CIO is untested in law and as such is something of an unknown quantity should any legal issues arise. The view is that CIOs will probably fall under many existing company law regulations (to avoid Parliament having to enact new laws) but this isn’t yet set in stone.
Only one of the new registrations to date was an existing charity converting to a CIO. There is not yet a process by which a charitable company limited by guarantee can transfer to a CIO structure. For existing unincorporated charities wishing to convert the process effectively involves setting up a new CIO and transferring in the old charity. Charities doing this will find they need to re-register with HMRC for Gift Aid and if already VAT registered, ensure that this is properly transferred over.
CIOs – a new route for charities
The 2011 Charities Act saw the long-awaited introduction of a new legal structure for charities: the Charitable Incorporated Organisation (CIO).
Presently, a CIO cannot offer charges over its assets and that would be a problem if it wanted to borrow money. One way round this may be personal guarantees from the trustees, but if the whole purpose of setting up a CIO is to achieve limited liability, then this will not be desirable.
Having only the CC as a single regulator may sound positive in theory, but compared to Companies House which has had many years practice of setting up and monitoring compliance, increased demands on the under-resourced CC may make the process a slow one. However, the staggered application process is no doubt taking some of the pressure off.
Under the previous structure, charities could set up a company swiftly and at least begin acting while the charity registration was underway. In practice we have never heard a charity client complain that dual registration was actually that much of a problem.
And so with all these potential issues, it begs the question: would anyone want to be a CIO?The answer is actually yes. In particular, smaller to medium sized unincorporated associations with a membership-based structure and smaller charitable trusts may well want to take advantage of the limited liability and simple reporting format offered by CIOs. Larger charitable companies are unlikely to want to convert preferring to stay with the longstanding guarantee company format. Of course, professional guidance is vital to ensure that charities and similar organisations do what’s best for them.
It will be intriguing to see how the sector develops, but the likelihood is that CIOs will represent a small evolutionary step rather than a full-scale transformation. We’ll have to see.
Sailesh Mehta, Charity Partner
T 020 7380 4923
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Insight | 9 www.hwfisher.co.uk
New rules put Members’ Voluntary Liquidations on top
What is an MVL?The concept of MVLs was first introduced back in 1986. It was designed to be a formal procedure to allow shareholders to shut down a company that was still solvent, selling off its assets and paying off creditors.
Why close a company that is still solvent?There are, of course, a number of reasons why you might want to close a company that is still solvent:
the shareholders/members might want to retire and draw out the cash remaining in the business;
a company may have been set up for tax-efficient reasons to invoice for consultancy services however the consultancy contract has now been terminated;
to rationalise a group of dormant companies for practical and administrative purposes;
or perhaps it’s a family-owned business and the next generation doesn’t want to run it.
Historically, there were two ways to wind down a solvent business. The first was simply ‘striking off’ the company. The directors would undertake an enquiry into the affairs of the company and if certain criteria were met and assuming there were no objections, the company would be struck off the register of UK companies. Of course, this meant directors had to handle the winding down and all its ensuing hassles themselves.
MVLAn MVL was the other route. It may be more expensive (as it required a qualified insolvency practitioner to manage the process) but is also popular as the directors and shareholders have someone to hold their hands through the, sometimes complex, winding down process and ensure that they comply with the legalities. In both cases, members would have received a capital distribution of the monies remaining in the business after creditors had been paid, which was often advantageous from a Capital Gains Tax basis as, if certain criteria were met, it qualified for a reduced rate of tax through Entrepreneurs’ Relief.
What the changes meanHowever, the rules have recently changed. The regulation under which a liquidated company or Limited Liability Partnership (LLP) was able to pay a capital distribution to members when being struck off was called ESC16, and in March 2012 it was withdrawn.
As a result, any company or LLP with more than £25k in assets must utilise the MVL procedure if it wants to distribute the assets by way of a capital distribution. If a company or LLP with assets greater than £25k is struck off the register then dividends to shareholders will be treated as revenue dividends, which in many cases will be not as tax-advantageous to the members involved.
Unsurprisingly, this has meant the number of MVLs has risen sharply in the past year. Some have seen this as a further sign of economic turmoil, but the truth is more prosaic. The weak UK economy hasn’t helped, certainly, but the main reason for the increase is that in most cases an MVL is now the best way for members to wind up a company.
As a result, any company or LLP with more than £25k in assets must utilise the MVL procedure if it wants to distribute the assets by way of a capital distribution
It is important to note that an MVL is only applicable if the company is solvent and can pay its debts as they fall due (including statutory interest) within a period of 12 months. Companies whose businesses have been severely hit by the weak economy and who are therefore insolvent cannot utilise the MVL procedure. In this circumstance, directors and shareholders should seek professional advice as soon as possible from an insolvency practitioner.
How do I go about closing a solvent business?Professional guidance should always be obtained prior to closing down any company (or LLP). As well as considering the most appropriate tax treatment for shareholders other factors, such as on-going contractual obligations and insurances, are sometimes also very relevant and need detailed review.
In many cases capital tax treatment of a distribution is beneficial however there are scenarios where striking off the business is the most appropriate route for the shareholders. If solvent liquidation is something you may need to consider, talk to an expert.
David Birne, Business Recovery Partner
T 020 7380 4908
With the recent Extra-Statutory Concession 16 (ESC16) being withdrawn, Members’ Voluntary Liquidations (MVLs) are on the increase.
www.hwfisher.co.uk10 | Insight
Why HMV survived as a retailer
So what unique circumstances made me so confident? The reason for the rescue of HMV is due to the position of its media suppliers. HMV’s principle business is the physical sale of CDs and DVDs. Although that market has contracted due to on-line streaming of films and downloading of music, there is still a significant market with revenues from physical sales of CDs and DVDs still exceeding downloads in percentage terms.
The risk for the suppliers is that if they do not have a high street presence to establish the retail price of their products they are left purely supplying to enormous groups of purchasers, namely the supermarkets and Amazon. Both of those constituencies are able to drive a very hard package of prices due to the volume with which they purchase. The suppliers need an alternative source of sale, so they can establish a retail price for their products which exceeds the amounts that is likely to be offered by the supermarkets and Amazon.
Unfortunately, the independent record selling market is a niche area, mostly catering for men of my age (over 50!), who retain an interest in owning a physical copy of an album, preferably on vinyl but, if not, on CD. My generation is probably the last who feel a need to own a physical item. Younger generations are more than happy to download a version of the album and play it on their mobile or MP3 player.
The problem for HMV was caused by the size of its high street estate. With all of the premises there are fixed amounts to be paid in respect of rents, rates and added to which you have variable costs such as electricity, staff costs and service charges. As the physical sale of the products has declined over the last 4 to 5 years, those overheads remained, at best, constant and in the majority of cases has increased. Having a presence in every high street is not necessary but, for the suppliers, having an outlet in some key prime locations is necessary. Because of that necessity for suppliers, it is likely that extended credit will be offered to the new HMV to enable it to stock up a smaller number of shops and sell products as before. In my opinion the slimmed down version that Hilco have acquired of locations in prime high streets and retail parks is likely to be a very good acquisition size.
Having a presence in every high street is not necessary but, for the suppliers, having an outlet in some key prime locations is necessary.
During the last two months of 2012 and January 2013, the UK saw the administration of various well known retail chains. Comet was the first to go in November and by Christmas the estate of shops had entirely closed with the loss of 4000 jobs.
Many commentators feared it was the end when HMV collapsed into administration in January 2013. I was always 100% convinced that HMV would survive as a high street name.
Nick O’Reilly, Business Recovery Partner
T 020 7380 4973
The problem for HMV was caused by the size of its high street estate.
HMV is unique and will be seen as a great restructuring in future, but actually is less to do with the viability of the business that has been saved but more with the needs of the suppliers to ensure that their margins are not further eroded by being held to ransom by major supermarkets and Amazon.
Insight | 11 www.hwfisher.co.uk
Sustainability is a civil right
Since then our understanding of the damage being done to the Earth by mankind has improved dramatically, and the environmental degradation of the world has been slowed down – but not stopped.
Many battles have been won but the war is still being lost. There are more people working in environmental and sustainability roles today than at any point in history. Many of them are doing wonderful jobs, but simply put we are collectively failing.
The question is what can be learned from this? It has been estimated that somewhere around 15-18% of people in Western countries rate the environment and sustainability as one of their primary discussion making factors. These people are the most likely to choose behaviours or purchasing decisions that limit or improve their environmental impact.
The challenge now is how to reach the next 50-60% of the population who sometimes consider sustainability in their decisions. They know its importance but somehow can’t quite act on that knowledge.
When we look at history it is evident that there are numerous ways that the world has radically changed from the status quo. Often this takes time and involves great sacrifice. The civil rights movement is probably one of the most successful modern examples where over a period of time things that were viewed as normal were transformed to become immoral and often illegal.
Just as the environmental movement must learn from the civil rights movement, sustainability needs to become a civil right.
Such a radical change involved winning the hearts and minds not only of those in positions of power but also of wider society as well. Many people with vested interests in keeping things like slavery, racism, sexism, and inequality had to be challenged and convinced that their behaviour and views needed to change. The sustainability world needs to learn from this model, and to adopt the techniques that were successfully employed before so that the great changes that are needed in our world occur regardless of where our current thinking and behaviour tells us what “normal” is. Just as the environmental movement must learn from the civil rights movement, sustainability needs to become a civil right.
It’s more than 50 years since the American scientist Rachel Carson wrote Silent Spring, her seminal book on the dangers of chemical pesticides that many credit as the birth of the modern environmental movement.
Jae Mather, Director of Sustainability
T 020 7874 7985
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Simon Mott-Cowan, Sustainability Partner
T 020 7874 7962
Good social and environmental stewardship communicated with a strong Corporate Social Responsibility (CSR) policy can deliver significantly streamlined business operations and real bottom line benefits. Smart companies see its compelling business case, and use sustainability as a core way of driving their business forward and achieving their long term objectives.
Starting pointsThe obvious place to start is establishing your baseline and setting about reducing your carbon footprint, as here you can demonstrate just how much money you can save by being more cost and resource efficient. Measures such as solar panels, LED lighting, recycling schemes etc. all have a clear business case and return on investment that can attract the support of management. This should be leveraged as a foundation around which measures with less obvious profit impacts can be implemented.
Smart companies see its compelling business case, and use sustainability as a core way of driving their business forward and achieving their long term objectives.
Organisations must be clear about what their goals are, how they intend to achieve them, how they measure their performance and what that performance is if they wish to be transparent. Communication is key to this process, executive figures are no longer only answerable to their shareholders but are expected to report environmental performance to their stakeholders, notably their employees. Sustainability becomes a corporate wide endeavour and both senior management and employee buy-in are required for sustainability to become truly embedded within an organisation.
Getting strategic about sustainability
As a corporate “buzzword” sustainability is here to stay but as a term that is fundamentally overused and misunderstood what are the real ways it delivers value to business?
There is often a disconnect within businesses between long term vision and short term targets. This is particularly true in a recession when businesses become even more concerned with immediate growth in order to survive. If sustainability objectives are effectively cascaded through organisations as key performance indicators for all departments and at every level of staff, this can help to bridge the gap between board level strategy and middle management drivers.
Staff engagementSustainability targets can also provide a powerful unifying tool for staff. CSR activities should give employees the opportunity to be part of the sustainability endeavours and bring the values they hold at home to the work place. Employees are likely to feel better about working for a company that is responsible and empowering them to have a positive social and environmental impact.
Similarly the next generation of employees are already incredibly sustainability savvy. Climate change is being taught in schools and graduates are looking to their future employers to champion the sustainability values they hold. Organisations wishing to attract the best talent must be prepared to be scrutinised on their sustainability credentials as part of their corporate reputation.
A truly sustainable organisation will look beyond its immediate impacts and consider the supply chain it belongs to as an extension of its reputation and responsibility. The dangers of not having a robust supply chain relationship were thrown into sharp relief by the horsemeat scandal – where even mainstream supermarkets were caught out by a confused and fractured supply chain. By cascaded sustainability values and clear objectives throughout the supply chain, poor procurement decisions can by identified and risks monitored and managed.
The next generation of employees are already incredibly savvy... Organisations wishing to attract the best talent must be prepared to be scrutinised on their sustainability credentials.
As a business concept sustainability is here to stay. It may not be a major game changer in terms of growth but the business case for operational efficiencies and corporate reputation are obvious. Beyond this, sustainable businesses will be able to see the long term value of embedding strategies that will set them apart from their competitors, whilst enabling them to protect against risk and recruit and retain top staff.
www.hwfisher.co.uk Insight | 13
An impressive job title, what does it actually involve?I am responsible for running the day-to-day operations of the business, overseeing our supply chain and managing the all-important relationships with our vendor partners. I’m also in charge of ensuring we meet our corporate responsibility goals. I lead a team of 70 people around the globe.
What attracted you to Speedo?Before joining Speedo I spent eight years working for another global brand, Procter and Gamble. But I’ve always been a keen sportsman and triathlete, and have competed in Speedo gear for years. So the chance to work for a brand that I’d always loved was too good to miss. The company encourages its staff to swim as much as possible – by giving us free swimming membership of a local gym. For a swimming fan like me, perks don’t get much better than that.
What’s the swimwear market like?Big and competitive. Globally, the market is estimated to be worth $13.6 billion, and Speedo is available in 175 countries. Our business is built on making products that perform brilliantly, whether you’re splashing in the pool with the kids or taking on Michael Phelps.
Athlete endorsement is a big part of Speedo’s strategy. Does that risk pigeonholing the brand?We are first and foremost a sportswear brand, and have been associated with athletes throughout our 85 year history. The first world record set by a swimmer wearing Speedo was in the late 1920’s, and we’re hugely proud of the fact that at the London 2012 Olympics, 57% of all swimming medals were won by athletes wearing our products. While we’re not seeking to expand into general fashion, our products are aimed at everyone who loves swimming – not just Olympians! In 2010, we launched Speedo Sculpture, a range of body shaping swimwear for women. Sculpture suits have been designed to fit like a second skin and provide all over body shaping, tummy control and bust support to ensure that every woman can look and feel great in and out of the water.
How has HW Fisher helped Speedo?We engaged HW Fisher’s specialist forensic division to carry out a royalty audit of one of our key global distribution partners. Fisher Forensic has an international reputation for licensing, franchising and royalty auditing, so they were a natural choice to help with this.
In many of our overseas markets our products are distributed by licensees, and it’s essential that they run the brand in the right way and pay the correct level of royalty. The Fisher Forensic team worked seamlessly with our in-house auditors on a review of one of our largest and most complex licensing agreements. Their expertise was invaluable, and they helped us tighten up the contract so that we now get the right information in a timely manner from all our partners.
You’re based in Nottingham, but Speedo was founded in the sunnier climes of Australia – where does the brand’s heart lie?We made our first swimming costume in 1928 in Sydney – and Speedo swimwear became known as the ‘Original Aussie Cozzie’, a nickname still used in Australia today. But now we’re a global brand that invests millions in new technology and research and development every year, we make a lot more than just swimming trunks. When I compete in my next triathlon in France this summer, I’ll be proudly wearing a Speedo triathlon suit.
In the spotlight... Matthew Brewster
Our client, Matthew Brewster, is the Chief Operating Officer of Speedo International
www.hwfisher.co.uk14 | Insight
They can help you expand your business in new parts of the world and advise on the best way to approach their local markets. Their primary role is to manage your licensees: that means ensuring their reporting is on time and complete, and collecting the royalties generated from the sale of the licensed products before passing them on to you (minus, of course, their fee).
They can help you expand your business in new parts of the world and advise on the best way to approach their local markets.
What should you look for in a good licensing agent?Their pedigree is a good first clue: what other licensors do they represent? Then you should identify the calibre and range of their potential licensees: some just work with a handful of local businesses in one or two areas, while others can offer a wide range of potential partners in anything from consumer goods and apparel to sports gear and video games.
It also makes sense to evaluate the quality of their reporting. You want maximum transparency, ideally with line-item detail on licensee activities so you can see exactly what is selling and where. Good agents will have detailed reporting formats and the market power to ensure their licensees report that way.
The thing to really look out for, though, is a willingness to go above and beyond the basics of licensee management. The best agents can advise on new business avenues and market sectors to explore, providing a hands-on service rather than just sitting back and doing what is contractually required.
Working with licensing agentsFisher Forensic helps clients work with licensing agents in a number of ways. The first is to audit licensees, ensuring that they comply with the detail of licensing agreements and that the royalties and payments they owe are properly defined and that nothing is incorrect or left out.
We have also audited the licensing agents themselves. They are part of the supply chain of royalties and so any bottlenecks or blockages can prevent licensors from getting the monies and reporting that they should.
Sometimes, for example, there may be conflicts of interest: the agent is in the same territory as its licensees and works closely with them, which shouldn’t, but may, affect its priorities. However, its contractual relationship is with the licensor, even if that entity is on the far side of the world. It should therefore always work to the latter’s best interests.
As a result of working closely with licensees, the lines may get blurred – and the brand/IP of the licensor can get blurred as well. For example, although ultimate product approval should rest with the licensor, if an agent permits a licensee to produce an item or service that is low quality or doesn’t fit the exact messages and needs of the licensor, it can impact the brand. And in the event of legal action, the licensee can believe it was justified because it wasn’t explicitly told ‘no’. That’s why good agents always ask for licensor permission first.
Audits can help ensure this happens properly every time, and more broadly can ensure that licensing agents are working effectively with the licensees for the benefit of the licensor at all times.
Finally, if a licensee pays royalties to a business in another territory, it has usually to deduct withholding tax (WHT). And in some countries, the agents are the responsible party for deducting that tax from the payments they receive from the licensees, prior to forwarding on to the licensor. However, they then need WHT certificates to prove they have done so and to pass these on, because without that documentation, licensors can’t claim the tax credit in their own country. Audits can help ensure this happens properly every time, and more broadly can ensure that licensing agents are working effectively with the licensees for the benefit of the licensor at all times.
Stuart Burns, IP and Royalties Partner
T 020 7380 4964
The role of licensing agents
If you have intellectual property you wish to license out and exploit in other territories, whether it be your name, your brand or your cartoon characters, licensing agents are the key to making it happen.
www.hwfisher.co.uk Insight | 15
From the 1 January 2015, the basis on which accounts are prepared in the UK will change for good.
There are potentially some significant changes for which companies will have to prepare. For some companies there will be options to consider. This article summarises the basic structure of the proposed new regime.
In the UK the requirements for companies to prepare accounts derive from the Companies Act 2006. However listed companies, in their group accounts, are required by EU directive to follow the differing requirements of International Financial Reporting Standards (IFRS). To accommodate the differences, the Act allows an option (which is available to all trading companies) to prepare accounts which follow either:
the detailed requirements of the Act (and regulations made thereunder) and of UK Accounting Standards; or
IFRS
Whichever option is taken, compliance with the applicable Accounting Standards is necessary to meet the legal requirements for the accounts to give a true and fair view.
There has been a long history of trying to converge the differing requirements so that all accounts would be prepared on a consistent basis, which it was proposed would be based around IFRS. The complexity of IFRS, and questions over the suitability of some of their principles for use with smaller entities, have led to a different outcome.
Under the new regime the structure within the Companies Act will remain, but substantially all existing UK Accounting Standards will be replaced by just three new standards:
Most companies which do not follow IFRS will prepare accounts based on requirements deriving from the Act and FRS 102 which, although moving closer to IFRS, retains many of the existing requirements. Small companies will, for the moment, continue to be able to follow the existing requirements of the Financial Reporting Standard for Smaller Entities.
Group companies will be able to follow a “reduced disclosure regime” whereby some disclosures made by the group as a whole need not also be made for each individual group member.
Companies in groups which account under FRS 102, would follow reduced disclosures specified in that standard.
FRS 101 caters for companies in groups which account under IFRS. It allows the company to apply a cut down version of the full IFRS which has also been modified to eliminate inconsistencies with the legislative requirements. Companies following FRS 101 are still required to follow the detailed requirements of the Companies Act 2006, including the requirements for the layout of the accounts, but as far as possible the detailed requirements deriving from accounting standards are consistent with IFRS. This will simplify the process of preparing consolidated accounts, as consistent measurement principles will be applied in both the subsidiary and group accounts.
In summary, these changes should improve the clarity and consistency of company accounts, but they will require finance departments to adapt.
Nauzer Siganporia, Technical Partner
T 020 7380 4965
The future of UK accounting
It may be some way off, but a minor revolution is afoot in accounting.
FRS 100 sets out the options available to companies;
FRS 101 sets out a “reduced disclosure regime” for companies in groups which prepare accounts under IFRS;
FRS 102 sets out the requirements which would apply to the majority of companies.
1
2
3
www.hwfisher.co.uk16 | Insight
After many years of discussion and planning, auto-enrolment has been introduced by the Government to try and address the fact that currently around 7 million people in the UK are not saving enough for retirement. The new rules essentially put the onus on all employers to provide pensions for their eligible employees.
The legislation sets out a number of mandatory duties for employers, which they must take if automatic enrolment is to be implemented smoothly and efficiently.
Planning aheadThe first step for an employer is to identify their ‘staging date’ i.e. the date which its employees are subject to automatic enrolment. This is based on the payroll size and employer reference and can be found by referring to the Pension Regulator’s website:www.tpr.gov.uk/staging
The Government decided to put back automatic enrolment for small employers, so no company with fewer than 50 staff will have any obligations before the next General Election which is due in May 2015. The revised windows for smaller companies are:
Employers without PAYE schemes, or who were established from April 2012 onwards, will have staging dates between April 2017 and February 2018.
In any event, the Pensions Regulator will contact employers around 12 months before their expected staging date but it is clearly preferable that an employer is aware of this well ahead of the formal notification.
EligibilityEmployers have to automatically enrol all employees, from age 22 to state pension age, into the scheme where they earn above the Personal Allowance limit. Outside of this category all other members of staff will need to be categorised and receive appropriate communications about their rights to join the scheme on a non-automatic enrolment basis. Crucially, eligible employees will have to be auto-enrolled within their first 3 months of employment. Employees will have the option of opting out should they wish but must not be incentivised to do so by their employer, otherwise the employer can expect severe fines from the Pensions Regulator.
Crucially, eligible employees will have to be auto-enrolled within their first 3 months of employment
ContributionsThe minimum contributions under the new legislation are as follows:
Existing arrangementsThe next step is to review existing provision, if any. Will the scheme meet automatic enrolment qualifying conditions as it stands? Does the contribution basis have to be changed? What are the current eligibility conditions?
Registering the schemeHaving identified a qualifying scheme, the employer has to register it with the Pensions Regulator. This is an online process and will be accessed through the Pensions Regulator’s website:www.thepensionsregulator.gov.uk
Paul Forde, Financial Adviser
Eos Wealth Management Limited
T 020 7330 0114
E [email protected] Wealth Management Limited is authorised and regulated by the Financial Conduct Authority. Any tax
reliefs or legislation mentioned are those currently available or in force and are subject to change.
Blink and you may have missed it but a significant new chapter in the history of Pensions Legislation started on 1st October 2012.
Auto-enrolment – a reminder
history of Pensions Legislation
Up until 1st October 2017
2% of band earnings, of which the employer must pay at least 1%
1st October 2017 to 30th September 2018
5% of band earnings of which the employer must pay at least 2%
1st October 2018 onwards
8% of band earnings of which the employer must pay at least 3%
1 April 2014 – 1 April 2015
50 to 249 members
1 June 2015 – 30 June 2015
Test tranche for fewer than 30 members
1 August 2015 – 1 October 2015
30 to 49 members
1 January 2016 – 1 April 2017
Fewer than 30 members
www.hwfisher.co.uk Insight | 17
Becoming an academy offers great opportunities to a school, not least the freedom to control its own budget and independence from the local authority.
But with that freedom comes both responsibility and accountability.
Academies are directly accountable to the Department for Education and responsible for all their accounting records. They must compile an annual report giving a detailed picture of their finances.
We have a team of expert accountants who specialise in the education sector.
For many headteachers and governing bodies, this level of scrutiny can be intimidating, and some may not have the accounting skills required to meet their accounting obligations.
But HW Fisher can help. We have a team of expert accountants who specialise in the education sector.
We work with a range of academies, helping them record correctly their day-to-day transactions and preparing their annual financial statements. We also provide a broad range of relevant services, including:
Andy Rich, not-for-profit partner, commented: “Becoming an academy is an exciting and liberating change for a school. Our dedicated team can help a new academy with all the necessary accounting support, so its governors and teaching staff can concentrate on doing what they do best – providing a first class education for their pupils.”
Andy Rich, Partner
T 020 7380 4988
Accounting for academies – it is far from academic
A steady stream of schools are converting to academy status – in England more than 2700 have now made the change.*
*Source: Department for Education
Whole Government accounts returns/abbreviated accounts returns
VAT status, returns, registration and planning
Risk management reviews
Outsourcing solutions
Payroll bureau services
Restructuring
www.hwfisher.co.uk18 | Insight
With the UK economy still so unsteady, businesses are looking for new areas to cut costs and improve efficiencies. The ‘back-office’ finance and administration functions are an obvious choice, particularly for small and medium sized enterprises (SMEs).
Some of the options available for this kind of outsourcing are straightforward:
Bookkeeping;
Management accounts;
Payroll; and
Invoice processing
Our back-office solution, FisherE@se, is an online accounting service that becomes your company’s back-office. The service is secure, confidential and accessible at any time of day.
Cost-effective solutionsIt is not just about the day-to-day routine finance work. It is about finding a more efficient alternative to any sort of processing or administration function around business finances – for example, a better way to create and issue a large volume of cheques your company might have to issue every day or an online storage facility for the years of financial filing and documentation every organisation has to maintain.
Overheads of a full-time accountant/bookkeeper can be a strain for many smaller businesses: employees need a desk, a computer, storage space, specialist software and regular training – not to mention sickness cover. In many cases outsourcing can be a cheaper alternative.
Real Time Information means additional payroll managementFrom 6 April 2013 employers are having to report PAYE data to HM Revenue & Customs (HMRC) in real time. Under the Real Time Information (RTI) regime, reporting has be done every time an employee is paid rather than annually – and that means managing payroll will no longer be a simple 10-minute monthly activity that can be done without specialist training.
Outsourcing can help you to stay focused on your core business without having to deal with the daily hassles of financial management.
What types of businesses should be looking to outsource their back-office accountancy function? Obviously it won’t be right for everyone, but it could be appropriate for those who want to focus their time and attention on what they are best at, rather than the financial administration.
Looking to cut costs – outsourcing is an efficient and cost-effective solution
Mukesh Shah, FisherE@se Limited
Director
T 01923 698 370
Outsourcing - taking the pain away and cutting costs
Outsourcing the function can help you to stay focused on your core business without having to deal with the daily hassles of financial management.
After all, there is no point paying the salary of a professional accountant and then asking him or her to spend hours chasing up invoices or other back-office work. The whole point of financial outsourcing is that it frees up time – and resources – that could be better spent elsewhere.
Larger firms with a small team of full-time accountancy personnel often look to outsource part of their finance operations. Doing so enables them to keep that important part of their business running while enabling the in-house accountancy team to work on more interesting and helpful work.
www.hwfisher.co.uk Insight | 19
So what are the red flags and how can other firms be sure they don’t hit the same choppy waters and go under? There are a number of danger signs and things partners need to do to ensure they don’t meet the same fate:
Expansion equals expense. Big new offices might be attractive and appealing, but bear in mind that a sharply increased quarterly rent is a significant fixed expense that won’t go down if trading slows.
Robust management information. There must be an executive committee (a ‘board of directors’ equivalent) and it needs good financial information, concisely reported. At least one partner needs to have a grip on the firm’s finances, because, after all, it’s their business. Relying on the COFA (financial compliance officer) isn’t enough – the partners need to keep a steady hand on the tiller.
A good relationship with the bank. Good accounting information will also be required by your bankers, so make sure you provide it.
Sensible borrowing levels. There was a time when law firms could get away with a 1:1 gearing ratio, where they borrowed £1 from the bank for every £1 put in by the partners. These days 2:1 or, better, 3:1 in favour of partners’ equity is far more prudent. If bank borrowing increases, the interest payments become another ‘fixed’ expense that won’t decrease if trading conditions worsen.
Keep an eye on personal borrowing. Equity partners often borrow to finance buying into the firm when they reach that level, and if the partnership helps them do so (as is often the case) it will probably be with the same bank the firm uses. That can mean the partners, and thus the partnership, are actually far more exposed to bank debt than they might have thought.
Working capital. Legal firms often face issues with unbilled work in progress (working capital), particularly if they are working on a long-term project that lasts for a year or longer. They need to ensure robust billing systems are in place to convert unbilled work in progress into debtors. That means anticipating problems, such as agreeing billing ahead of time so they do not run into issues with invoices down the line.
Bill regularly. Whether fees are fixed transaction or time-based, regular billing is essential. Ensure that billing processes are agreed with the client up-front and stick to the arrangements.
Control your debtors. Once work has been billed, that is not the end of the story. Firms need effective credit controllers who will chase clients and ensure invoices get paid. Some firms leave this to the client partners, which is potentially disastrous – they don’t want to upset their client so they may let invoices slide. Effective credit control requires a good credit controller and client partner liaison.
These are mostly simple accounting procedures, but they need partners at the top of the firm who are willing to manage the finances and ensure the firm’s cash flow position stays healthy. As for failing to do so…well, the legal trade press are reporting a number of those stories at present.
Recent months have seen some very high-profile law firms go into administration. Both Cobbetts LLP and Dewey & LeBoeuf seemed to be doing well – at least from the outside – until suddenly they struck major cash flow problems and imploded.
Paul Beber,
Professional Practices Partner
T 020 7380 4961
Financial red flags forlaw firms
Paul Beber,
Professional Practices Partner
T 020 7380 4961
www.hwfisher.co.uk20 | Insight
Foreign businesses looking to set up operations in the UK are often pleasantly surprised by how straightforward it can be. The two main options are to create a UK subsidiary company or to create a ‘branch’ of the overseas business through which to trade in the UK, both of which are much easier to do here than in some other territories.
Exploring the benefitsFirstly, the UK offers an attractive tax environment. To take one example, if employees from an overseas parent company are seconded to its UK entity for a short period (up to two years), the seconded employee can be provided with certain benefits by the UK business that are not subject to local taxation. For instance, the UK business could pay all of the rent on the employee’s living accommodation and this would not be considered taxable income.
Research and Development (R&D) tax relief is also very generous. For small and medium sized enterprises, a corporation tax deduction of 225% of the qualifying expenditure on R&D is available. If this enhanced tax deduction results in a tax loss for the period, the company may be entitled to surrender the loss in return for a cash payment from HM Revenue & Customs (HMRC) equal to 24.75p for every £1 spent on R&D, which can have very beneficial cashflow results.
The Patent Box, introduced in April 2013, means that businesses can elect to pay only 10 per cent corporation tax on profits derived from a qualifying patent. And that is on top of that fact that corporation tax generally is very low in the UK (currently 23 per cent from 1 April 2013 and dropping to 21 per cent on 1 April 2014 and then to a mere 20 per cent from 1 April 2015).
In addition, subsidiary companies (as separate legal entities) may need to be funded by the overseas parent. Typically, UK companies are funded by either equity (share capital) or debt (shareholder loans or external borrowings). This remains a complex area, but it is worth noting that unlike in many other territories, interest paid on commercial levels of debt by UK companies is tax-deductible. This has made having a UK subsidiary a tax-efficient and thus appealing concept to a lot of overseas businesses.
Repatriation of profits is another area of keen interest. The UK has an extensive network of double tax treaties that can reduce or avoid withholding tax, plus the UK also benefits from EU laws such as the Parent-Subsidiary Directive.
With careful structuring, this means profits can usually be repatriated with little or no withholding tax being applied, provided that HMRC has provided advance clearance. Dividend payments to shareholders are also free of withholding tax, further underlining the UK’s attractiveness to overseas companies.
Talent is another key area, and the UK’s flexible employment laws ensure a very fluid labour market. Attracting the best talent means understanding employee expectations, such as benefits in kind (e.g. private medical insurance), salary demands and other complex incentives such as employee share schemes. In this latter area, the UK has one of the world’s most sophisticated regimes – which makes it attractive to employees provided the share scheme has been structured with the appropriate professional guidance.
All in all, the UK remains the territory of choice for inward investors into Europe, provided they set up their operations in the right way, comply with the tax laws and make the most of the UK’s bountiful reliefs, opportunities and talent.
Why UK Plc still appeals to inward investors
Choosing to set up a UK business is not just a case of understanding the legal and technical aspects. It’s about why doing so makes sound commercial sense.
Michael Davis, Managing Partner
T 020 7380 4963
Brian Lindsey, Corporate Tax Partner
T 020 7380 4995
www.hwfisher.co.uk Insight | 21
Stackhouse Fisher Limited is an appointed representative of Stackhouse Poland Limited who are authorised
and regulated by the Financial Conduct Authority to sell general insurance products.
Darren Humphray,
Stackhouse Fisher
T 01483 407 467
But for wealthy individuals, that contrast is less polarised. People with expensive homes and possessions often also own exotic cars, boats or jewellery. And they will want to protect them with specialised, individually tailored insurance.
As a general rule, those who have worked hard to earn something will be equally enthusiastic and energetic in seeking to protect it.
As a result, conventional insurance policies are unlikely to be up to the task of protecting their most prized possessions.
But wealthier individuals’ circumstances are often more complex than most people’s. Their financial affairs may be arranged in a tax efficient, but unconventional, way. As a result, conventional insurance policies are unlikely to be up to the task of protecting their most prized possessions.
The “tick box” approach of standard policies and insurance price comparison websites can result in them either being refused cover, or worse, buying insufficient cover.
Finding a solutionStackhouse Fisher specialise in helping the more affluent – loosely defined as those earning more than £100,000 per year - get the right policy for their needs.
We usually start the process by arranging to visit the client at home. Personal visits like this are the best way to build a clear picture of what cover is required, and what is not.
Our goal is always to find a policy that includes all the features the client wants, and none that they do not. This will ensure two crucial things:
that the client does not overpay for their policy, and;
that there are no gaps in the cover.
Stackhouse Fisher can also help their clients adopt a portfolio approach to their insurance. Rather than insuring each asset individually in a piecemeal approach, this allows clients to have a single policy for everything they want to insure.
Their house, contents, art, antiques, valuables, cars, boats and travel insurance can all be covered in one plan. The convenience of having one policy, with one renewal date and looked after by one client manager is one of the huge attractions of such an approach.
According to the insurance industry, as many as six million UK households could now be underinsured.
We can also help clients ensure that they are fully covered for the current value of their items, as well as regularly carrying out insurance audits for our clients to ensure that they have adequate cover.
This is particularly important when it comes to insuring jewellery, as the turmoil in the equity markets has sent the values of many precious metals rocketing in recent years.According to the insurance industry, as many as six million UK households could now be underinsured.
Though its extraordinary growth dropped off a touch at the start of 2013, gold is still worth more than four times what it was a decade ago.
These rising values have not escaped the notice of criminals, and one mainstream insurer reports that jewellery now accounts for a third of all theft claims. Ensuring their jewellery is adequately insured against theft is essential for everyone, and especially those with rare and high value items.
The needs of wealthy individuals are as unique as they are. At Stackhouse Fisher we pride ourselves on our ability to build an insurance policy around a client’s needs, rather than the other way round.
The right policy can offer better coverage levels, less small print and cost less – our challenge is to help each client find theirs!
Insurance is a service with a rare distinction – vital but rather unappealing, its importance is in direct inverse proportion to the interest people tend to take in it.
Private client insurance – more important than ever
f Stackhouse Poland Limited who are authorised
eneral insurance products.
Darren Humphray,
Stackhouse Fisher
T 01483 407 467
now be underinsured.
We can also help clients ensure that theyare fully covered for the current value of their items, as well as regularly carrying out insurance audits for our clients to ensure that they have adequate cover.
we pride ourselves on our ability to buildan insurance policy around a client’s needs, rather than the other way round.
The right policy can offer better coverage levels, less small print and cost less – our challenge is to help each client find theirs!
www.hwfisher.co.uk22 | Insight
Client Survey Results We are always working hard to improve how we work with our clients and every year we like to ask our clients for their opinions. Our annual survey asks questions on all areas of service delivery including: understanding of our clients’ business; value for money; quality of our communication and our people.
Henry Poole & Co wins Queen’s Award
Upcoming events:
HW Fisher news
Date: Monday 3 June 2013Time: 3:30pmInformation & RSVP: Sarah Chalkley([email protected])
Date: Thursday 27 June 2013 Time: 4pmInformation & RSVP: Nicky Purnell([email protected])
Society of Authors - Members’ Event Corporate Tax Update
Some key statistics:
92% of our clients say we ‘always’ demonstrate an understanding of their industry
88% say we ‘always’ offer good value for money
83% of our clients say we ‘always’ communicate regularly and appropriately to their needs
We are pleased to announce that our client, Henry Poole & Co, the famous Savile Row tailor, was honoured with the prestigious Queen’s Award for Enterprise in International Trade. The company was able to demonstrate outstanding achievement in international trade over a sustained period. Her Royal Highness The Princess Royal presented the company with the Award at a ceremony at the company’s premises in January 2013.
SME Legal Practices Survey 2013If you would like to receive a copy of our SME Legal Practices Survey 2013, please email [email protected] (available at the end of May)
Thank you to those clients that completed the questionnaire, your feedback helps us to improve how we work with you.
www.hwfisher.co.uk Insight | 23
HW Fisher & CompanyBusiness advisers - A medium-sized firm of chartered accountants based in London and Watford.
Related companies and specialist divisions:
Fisher Corporate PlcCorporate finance and business strategy
FisherE@se LimitedOnline accounting and back-office services
Fisher ForensicLitigation support, forensic accounting, licensing and royalty auditing
Kingfisher CollectionsRoyalty administration and collections services for IP owners
Fisher PartnersBusiness recovery, reconstruction and insolvency services
Fisher Property Services LimitedProperty investment, management and finance
Jade Securities LimitedBusiness divestments, mergers, management buy-outs and acquisitions
Stackhouse Fisher LimitedSpecialist insurance services
Eos Wealth Management LtdIntelligent wealth management and financial services
VAT Assist LimitedUK VAT representative
London officeAcre House11-15 William RoadLondon NW1 3ERUnited Kingdom
T +44 (0)20 7388 7000F +44 (0)20 7380 4900E [email protected]
Watford officeAcre House3-5 Hyde RoadWatford WD17 4WPUnited Kingdom
T +44 (0)1923 698 340F +44 (0)1923 698 341
HW Fisher & Company and HW Fisher & Company Limited are registered to carry out audit work in the UK and in Ireland. A list of the names of the partners of HW Fisher & Company is open to inspection at our offices.
Fisher Forensic, Fisher Okkersen, Fisher Partners and Kingfisher Collections are trading names of specialist divisions of HW Fisher & Company, Chartered Accountants.
HW Fisher & Company Limited, Fisher Corporate Plc, Fishere@se Limited, Fisher Property Services Limited, Jade Securities Limited, Fisher Forensic Limited, VAT Assist Limited, Eos Wealth Management Limited and Stackhouse Fisher Limited, are related companies of HW Fisher & Company, Chartered Accountants.
HW Fisher & Company, HW Fisher & Company Limited and Jade Securities Limited are not authorised under the Financial Services and Markets Act 2000 but are regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities. They can provide these investment services only if they are an incidental part of the professional services they have been engaged to provide.
Fisher Corporate Plc is authorised and regulated by the Financial Conduct Authority under reference 193921.
Eos Wealth Management Ltd is authorised and regulated by the Financial Conduct Authority under reference 543025.
Stackhouse Fisher Limited is an Appointed Representative of Stackhouse Poland Limited who are authorised and regulated by the Financial Conduct Authority under reference 309340.
Insight is produced with the intention of providing general information. Examples used are for guidance only and not a substitute for personalised professional advice. Views expressed are those of the authors and do not necessarily represent the views of HW Fisher & Company. All liability is excluded for loss or damages that may arise as a result of any person acting or refraining to act in reliance upon any material and information appearing in this newsletter.
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© HW Fisher & Company 2013.Print date: May 2013. All rights reserved.
HW Fisher & Company is a member of the Leading Edge Alliance, an alliance of major independently owned accounting and consulting firms that share an entrepreneurial spirit and a drive to be the premier providers of professional services in their chosen markets.
www.hwfisher.co.uk