Liechtenstein is the latest target of HMRC crackdown

HMRC’s crackdown on tax evasion continues to reach out into popular tax havens. The drive began dramatically in 2006 with an unprecedentedly large disclosure order being served on the offshore arm of British high street bank Barclays. The resulting investigations are eventually expected to yield up to £1.5bn. HMRC hailed the granting of this order by the Special Commissioner as a landmark ruling and have been proved correct, with orders against other banks following on.

In April 2007, HMRC announced an amnesty for taxpayers with offshore arrangements – full disclosure and co-operation would result in more lenient treatment and reduced penalties. Over 60,000 taxpayers registered for the amnesty scheme initially, and many of them then made disclosures which raised around £400m, but as of today around 20,000 of those who registered have still not made a disclosure. HMRC is understood to favour a hard line against these reluctant taxpayers, with the outgoing Chair suggesting in an interview with the Sunday Times that they should face prison sentences, and should not be eligible for this year’s similar amnesty arrangements.

The current phase of the crackdown suggests a slight shift of focus on the part of the investigators, from institutions with multiple offshore interests, to specific tax havens. Last July, Guernsey-based taxpayers found that a number of well-known high street banks had disclosed their details to HMRC. This year, the focus is on Liechtenstein, where HMRC believes up to £2bn in taxable assets and income has been concealed by as few as 300 individual Britons. This investigation is based on information supplied (for a reward) by a former employee of Liechtenstein-based LGT bank, and orders against another 15 Liechtenstein banks are currently being sought. The Liechtenstein investigation is expected to take anything up to four years, but concurrent investigations can apparently be expected in the Channel Islands, the Virgin Islands, Panama and Monaco.

As ever, early disclosure and full co-operation is agreed to be the best policy among all major tax accounting firms and leading industry figures.

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The Tax Man

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Business Valuation in Distress

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FD in The Cupboard

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The Tax Man

The Tax Man

A new client was introduced to us via a recommendation with whom we arranged to meet on a regular basis in order to determine a number of changes that we felt were needed to their business structure. The client was at the time operating as a husband and wife partnership. The business was flourishing and had a number of large contracts with big organisations.

At the start of the process they were still heavily immersed in their day to day operations so we can get a full flavour for their ambitions, aspirations and growth plans. We quickly recognised there were sufficient tax savings which can be achieved by changing the structure from a partnership to a corporate entity. We carried out a business valuation and disposed of the goodwill from the old to the new business. Unfortunately, as often is the case with efficient tax planning, HMRC got involved and disputed our valuation.

An HMRC investigation can be a very stressful time for any client, even for those best prepared. However, our client had minimal input in the HMRC communication as we dealt with this professionally behind the scene. As an added benefit, our client could rest on the security that all work was covered by insurance and therefore all costs and time in dealing with this enquiry were covered by the fee protection policy we had put in place.

The initial approach taken by HMRC was very aggressive and they tried to present an argument that there was no goodwill in the business. We challenged HMRC’s view that the goodwill was worthless. After lengthy correspondence and numerous telephone calls, HMRC agreed 100% with our original valuation, which preserved our original tax saving plan for the client. Tax savings on this case where in the region of £75K at the outset, with ongoing savings of £6,000 per annum. We are pleased to add another happy client to our portfolio.

Business Valuation in Distress

Business Valuation in Distress

Selling a business is never an easy process, but when disputes arise, the need for a reliable third party due diligence process is even greater.

Tearle & Carver have extensive understanding of the requirements for remaining objective when managing a potentially difficult company buyout. In one such case, we were approached by the courts to act as independent accountant for an acrimonious business sale in which one partner was exiting the business and selling shares to the other. Given the circumstances, both sides had totally polar views of what their business was worth.

After arranging an initial meeting with the company, we were thorough in ensuring we completed due diligence, validating the figures in the accounting records, carrying out adjustments where appropriate, and drafting a set of reliable management figures within the framework required by the court.

A draft version of the report detailing our findings and conclusions was submitted to both parties, giving them the opportunity to voice any queries or concerns and ensure all relevant factors had been taken into account.

Through this process, we were able to submit a final report to the courts that was both binding and acceptable to both parties, effectively resolving what could otherwise have been a time consuming and costly process for all sides.

FD in The Cupboard

FD in The Cupboard

For smaller companies, it is often not possible or cost effective to pay for a full-time Financial Director.
Many of our clients therefore make use of Tearle & Carver’s extensive expertise to provide the services of an FD as and when required.

In this case, we were approached by the management team of an organisation looking to acquire the existing business via an MBO (Management buy out). Their business plan had proved ineffective for securing funding, and what they needed was financial expertise from someone with a developed understanding of the company’s internal workings.

Tearle & Carver helped deliver the solution our clients were looking through utilising our bank contacts in order to make the MBO viable, while also building a robust business plan and preparing our client for the rigorous vetting process. To help with cash flow issues, we introduced factoring which led to improved cash flow management.

We advised on the appropriate business valuation and structure, and continued to prepare monthly accounts to track profgress once the management were fully in command of all the information they needed to move their business forward.

In order to best assist these clients through the crucial first year of ownership, we attended board meetings on a regular basis, a service that we continue to provide to date.

With our continually developing understanding of their business, this client is able to remain confident that Tearle & Carver can provide any financial support they may need, now and in the future.