If you have questions about a particular financial topic and can’t find the answer on our website, ask us the question directly by filling the form in the sidebar. We will contact you to give you a personalised answer. In the meantime, please see below some interesting questions asked here by other business owners.
If you need more information regarding the below questions, please do not hesitate to contact us on 01491 579740.
How is the announcement of higher tax rates on dividends going to affect me and my business?
One of the major changes announced in the Summer Budget 2015 and due to take place from April 1st 2016 is higher tax rates for dividends. These changes will impact many business owners who pay dividends as part of a tax efficient remuneration strategy.
The main points to note are from 6 April 2016:
- The dividend tax rates at each level are increasing by 7.5%.
- There is a new £5,000 tax free allowance for dividend income.
- The old system of a notional tax credit and grossing up of dividends that confused so many people will disappear.
You may want to consider accelerating or making one-off dividend payments before 6 April 2016 to pay tax at the current lower rates. Where large dividends are routinely paid, the tax savings could be significant.
HMRC have also announced they plan to tighten the rules on other means of extracting profits from 6 April 2016. The rules around share buybacks, liquidations, and company share sales may all be changed to make it harder for shareholders to extract profits at capital gains tax rates with Entrepreneurs’ Relief. If you are considering realising value, you may want to look at the options open very soon before the rules change.
Talk to us, our tax team will be able to help you find the right tax efficient structure for your business.
What is FRS102 and how does it affect my business?
Over the last few years, the Financial Reporting Council (FRC) has undertaken a complete review of the accounting standards which govern the presentation of financial statements in the UK. As a result, all pre-existing FRS’s, SSAP’s and UITF’s, which together make up “United Kingdom generally accepted accounting principles (“UK GAAP”)” have been replaced by a set of new Financial Reporting Standards – FRS100 to FRS105.
FRS102 is the standard which impacts the majority of companies in the UK, and so has rightly attracted the most attention, and has become synonymous with the new accounting standards.
The aim of the new standards is to bring UK GAAP more into line with International Financial Reporting Standards (“IFRS”), and might affect the way that a company’s financial performance and position is measured and presented.
It is important that all companies are aware of these developments in financial reporting and make an assessment of how they will impact their accounts.
Adoption of FRS 102 is mandatory for companies typically turning over more than £6.5 million for accounting periods beginning on or after 1 January 2015, and for small companies for accounting periods beginning on or after 1 January 2016. For small companies (typically up to £6.5 million turnover), there is a specific section within the standard which significantly reduces the disclosure requirement.
Our Audit, Tax and Advisory team would be delighted to discuss the impact of FRS102 on your company.
Who would buy my business?
The obvious candidates are often already known to business owners, being competitors, perhaps your major customer or indeed a party who has already expressed an interest. However, as a corporate finance adviser you will want us to identify bidders who operate in adjacent markets, international looking buyers looking to enter your geography or even acquisitive corporates looking more generally for successful businesses to invest in. It is also important to consider options closer to home such as your existing management team who may wish to explore acquiring the business from you, backed (or not) by external finance. Please find here more information about business sales.
How can private equity help unlock shareholder value?
Private equity funds typically invest in businesses with 3 clear factors
- Clear positioning in their market
- Dynamic and strategic management team
- Defined use of funds to drive value creation in order to exit and realise their investment in a medium term timeframe
As a result they may invest into a business for a number of reasons:
- to support an MBO to allow existing shareholders to retire / exit the business with internal management stepping up to lead strategically;
- to support a new management team coming in to supplement those remaining in the business and take it forward;
- to provide development or growth capital, for expansion into new territories, acquire complementary businesses or to develop new products.
Whatever the investment strategy, private equity, often supported by new banking facilities as well, is a good source of funds to support the next stage in a business’ life cycle.
Private equity is more than just about the funding though, and a common factor across all private equity investments is the support they provide to management teams. They are investors, not managers, and will rely on the expertise of the people who know the business and its market best for day to day operations. However, private equity are investors alongside management teams and will look to build value, from identifying and leading M&A opportunities, strengthening corporate governance, and spotting new and complementary markets to target. They will sit on your board and look to introduce non-executives to support the growth plans of the business.
Ultimately they are investors looking to generate a financial return and as such a clear exit strategy both for themselves and their management teams will be need to be mapped out whereby all shareholders are working together to maximise equity value.
What is a buy & build strategy?
And why stop at buying just one business? A buy and build strategy starts with the initial acquisition of a “platform” business (or you may already own the platform?), which would typically have stronger management and systems than perhaps it needs to operate on a standalone basis. “Bolt on” acquisitions can then be made, either of similar companies or individual contracts, which can be integrated into the existing platform to build a bigger business which can then benefit from a range of synergies. Please find here more information about business acquisitions.