Briefing Note on Income Splitting post Revenue guidance issued in Dec 07
Company Dissolutions – Capital vs Income
Background and Information
vfdnet Approved Partner Painless Business newsletter “We all Stand Together”
How Credit Reports can help you research Prospects, provide added value to clients and research Directors other interests
The most significant Accounting changes to UK GAAP in a generation.
Article supplied by Eadie Young – Jan 08
THE NEW INCOME SPLITTING RULES – ARE YOU AFFECTED?
Update on this topic coming shortly – James 20 Nov 2008
Company Dissolutions – Capital v Income Distributions and ESC C16
Article supplied by Cranfield Business Recovery Jan 08
When a company reaches the end of its useful life, it is generally wound up, although it is quite possible to just leave a company and it remains dormant.
If the decision is to have the company struck off the register held at Companies House, it is possible to avoid being involved in a formal winding up procedure under the Insolvency Act 1986 (as amended), by either:
- asking the Registrar of Companies to strike the company off the Register and so dissolve it under Section 652 Companies Act 1985 (“S652”), or
- becoming inactive and waiting to be struck off and dissolved.
Dissolution under S652 should not be referred to as a winding-up nor as an ‘informal liquidation’.
If distributions are made as part of one of the two dissolution processes above, there is no winding up and therefore such distributions will normally be treated for tax purposes as an income distribution within S209 ICTA 1988.
However by virtue of Extra Statutory Concession (“ESC”) C16, providing certain assurances are given to the Inspector before the event, the Revenue is prepared for tax purposes to regard the distribution as being a return of capital as if made under a formal winding-up and a liability under S209 ICTA 1988, will not arise on the distributions of assets to shareholders.
In order to qualify the company must satisfy the Inspector that:
- it does not intend to trade or carry on business in the future, and
- it intends to collect its debts, pay off its creditors in full and distribute any balance to its shareholders (or has already done so), and
- it intends to seek or accept striking off and dissolution
In addition, the company and its shareholders must agree that:
- they will supply such information as is necessary to determine, and will pay, any corporation tax liability on income or capital gains, and
- the shareholders will pay any capital gains tax liability (or corporation tax liability in the case of a corporate shareholder) in respect of any amounts distributed to them in cash or otherwise as if the distribution had been made during a winding-up.
Not withstanding the tax treatment of capital distributions in striking off under ESC C16, however, the making of a capital distribution outside a formal winding up remains unlawful.
If there is an unauthorised return of capital to shareholders, the company has the right to recover the money from its members under Section 654 of the Companies Act 1985, which would pass to the Crown as Bona Vacantia when the company is dissolved. Therefore, the Crown, acting through the Treasury Solicitor would be entitled to recover that distribution from the members.
The only legal way to avoid this “right” passing to the Crown as Bona Vacantia is to put the company into formal liquidation prior to dissolution, or legally reduce the amount of the share capital prior to the company dissolution.
In March 2007, the Treasury Solicitor issued the second version of Guidelines setting out circumstances where, as a concession, the Treasury Solicitor will waive the Crown’s right to any funds distributed to members prior to dissolution if:
- a company has been struck off under Section 652A of the Companies Act 1985, and
- the shareholders have taken advantage of the ESC C16, and
- the amount of the distribution is less than £4,000.
The Guidelines specifically states that if the amount of the share capital exceeds £4,000, the company should be put into liquidation prior to dissolution, or steps taken to legally reduce the amount of the share capital to below £4,000 prior to the dissolution of the company.
The Guideline’s reference to “unauthorised returns” of capital that may become Bona Vacantia, only applies to distributions of share capital (which would include share premium and any non-distributable reserves) and not capital distributions. Therefore, the £4,000 limit only applies to distributions of share capital and not to capital distributions in general and thus for most private companies, whose share capital is less than £4,000, capital distributions of any amount can continued to be made under ESC C16/Section 652 procedure without the need to be concerned about Bona Vacantia issues.
Important Note: This Briefing is intended for use as a guide and should not be used as a substitute for professional advice. If you have any queries arising from this Briefing please contact Cranfield Recovery on 02476 553700.
Associates of vfdnet, both Virtual Finance Directors (VFDs) and Virtual Financial Controllers (VFCs) wish to meet up and network and also have a need to keep up their Continuing Professional Development (CPD). (Keeping up to date with relevant topics is good practice for us all.)
Vfdnet proposes setting up a Quarterly ‘Breakfast Briefing’ where one of our chosen partners will provide an update to the group on a specific topic. This should provide a good networking opportunity for vfdnet Associates and also provide extra CPD hours or points.
It is envisaged that the Breakfast Briefings will start at 7.30am with a full English Breakfast with the invited professional speaking for about 30 minutes, allowing time for questions and answers so we can all leave by 9am.
Possible speakers and topics are:
- Corporate Lawyer – Application of the Companies Act 2006
- Accountant – update on SME Accounts
- Human Resources – implications of Corporate Manslaughter Act
- IFAs – changes to company Pension requirements
- Insolvency – the ethics of Pre Pack administrations
- Marketing – wise spend in a recession
The briefings should not be relied upon for advice about a specific client issue or situation, however the briefing will help the VFD or VFC understand the key issues involved and how to approach the issue.
Each Breakfast Briefing talk should summarise the key points relating to the subject and provide a high level overview of your topic. Please remember that although the audience is informed we may well not know your professional Jargon or abbreviations. Often a ‘Jargon Buster’ information sheet for people attending is very helpful.
Virtual Finance Directors (VFDs) and Virtual Financial Controllers (VFCs) typically work with 3 to 6 client companies and are very much trusted advisers. VFDs and VFCs may well find clients have questions or needs which require specific advice or input. The vfdnet Breakfast Briefings provide an ideal opportunity to provide a timely summary and indicate your specific capability and experience.
Please could speakers restrict their presentation time to 30 minutes which will probably involve between 10 and 15 slides. The presentation should be emailed to me in advance at james@vfdnet for backup and for creating pdf slides which can be uploaded onto the Resources section of the vfdnet website.
Speakers should not use the presentation time as a heavy advertisement for their business but rather seek to demonstrate their experience and knowledge of the subject by relevant and appropriate information. A brief factsheet or tipsheet and perhaps a general brochure would be helpful for Breakfast Briefing VFDs and VFCs, however please avoid extensive ‘delegate packs’.
The Breakfast Briefings will cost £15 to include a full English Breakfast, coffee juices etc, private room hire and a great networking opportunity with your fellow VFDs and VFCs.
I look forward to welcoming you to the next Breakfast Briefing!
James Shand BSc FCA
Director – vfdnet
Painless Business Newsletter
Painless Business Newsletter #109
|Amuse, Inform and Inspire September 2011|
Paul McCartney’s early eighties hit We All Stand Together could well provide a newsletter metaphor on the descent of game-changing talent to Christmas pop mediocrity, but this month instead I want to focus on the lyrics, and what they tell us about organisational success.
Win or lose, sink or swim
One thing is certain we’ll never give in
Side by side, hand in hand
We all stand together
(Can you hear the frogs going “bomp, bomp”?)
On the day this newsletter is being put together, Celia and James are delivering a workshop on managing small teams. We expect a lot of the questions to be about motivating individuals and driving performance. Our belief is that success comes from garnering the team spirit, not the pushing of the individual.
We all Stand Together
This month that belief has been fuelled by James’ very recent involvement with the fourth Choko Beer Festival – an event that has almost doubled its turnover in four years, has raised thousands for local causes and for Choko, and has become a firm feature of the South Oxfordshire calendar. Part of its popularity is that it is one of the few days of the year where drinking and having a good time is a good thing – because it is all for charity!
The event is a huge logistical effort – requiring the services of over 50 volunteers over several days to arrange pre-publicity, set up the venue, ensure security, staff the festival on the day and then clear up afterwards. No-one gets paid, yet everyone is motivated to do their bit (and often more than their bit). So if it isn’t personal financial reward that drives people to do so much, what is it?
Common Purpose – there is widespread evidence that teams perform better when they share a goal which they all believe in. Whether a sports team looking to win a championship (or not to come last in a championship if it is a Scottish rugby squad), a business team trying to deliver a large project or a medical team trying to save a patient’s life, they will perform best when everyone knows why they are there, and what they are working collectively towards.
What is your team working towards, and does everyone know?
Appreciation – with so many small cogs being essential to the working of the whole, it can become hard for an individual to feel noticed or appreciated, so the Beer Festival committee work hard to ensure they regularly and repeatedly express gratitude for the effort people put in. It is because this appreciation is shown throughout the event that people are happy to step up and do extra shifts, run errands at short notice and get up on a Sunday morning to pick up cigarette butts by hand.
How do you show genuine gratitude for the contribution your colleagues make?
Understand Each Other – many of the volunteers in the Beer Festival team have travelled together, to see the projects we fund in South Africa. Others have many connections with shared interests in a small community. As a result, they seem to have developed a tolerance for their individual foibles – they know who needs clear instructions and lots of information, who is less interested in detail but is able to see the bigger picture, and who runs round looking frantic but generally bumbles through (that will be James). That understanding seems to foster greater flexibility in how they achieve what they want.
Do you understand the people in your team? Do you know what is important to them?
Healthy Emotional Bank Accounts – Stephen Covey’s 7 Habits of Highly Effective People talked about the idea of emotional bank accounts (and it was covered in this newsletter many years ago). In any relationship, we make deposits and withdrawals against people’s trust, support and engagement with us. Missing an appointment might be a withdrawal, staying late to help a colleague might be a deposit. If you want to be able to draw on people at short notice, ask for special favours, stretch them to perform at their best, this is easier if you have been making deposits beforehand – building up their trust and the relationship you have with them. For example, the Beer Festival committee write to all the neighbours every year to thank them for their support and understanding – which makes them more tolerant of the noise and the parking congestion.
What are your emotional bank balances with the people in your team? Are you making deposits or withdrawals?
For James, helping with the Beer Festival is an exhausting but very personally fulfilling few weeks. For you, we hope it will be a useful reminder of how you can get the most of the people you work with – it is not about beating them with sticks, or even of tempting with carrots. It is about deriving a common purpose, showing genuine appreciation, understanding each other and ensuring your relationship bank account is suitably in credit – then you will all stand together.
For those who have no clue what the bomps refer to, please go here.
Painless Business News
As our self-proclaimed “Referral Month” draws to a close, we would be keen to hear from any of you who chose to focus on getting more referrals, and what has happened as a result.
We have certainly seen a pleasing level of contact (though disappointingly, no one singing “Baby Now That I Found You”) for both one to one coaching and for speaking engagements, including overseas opportunities. Thanks to those who have passed our name on, we do greatly appreciate it. And we are always looking for more!
Autumn is often a busy time for us – a ‘new school term’ feel seems to encourage everyone to refocus and consider support for achieving their annual goals in the remaining three months. If you want a 12 week push to make the most of your year, we are very happy to talk with you.
September’s business book is only partially completed, so we will save that for another issue, instead a work of fiction gets a mention, not least because it fits well with our theme for the month. Of Mice and Men by John Steinbeck has a number of attractions – not least it is a lot shorter than Grapes of Wrath and thus easier to hold when reading laid out on the sofa! But the literary appeal is the bond between George and Lennie, and the value of sticking together. According to the academic notes in the book, this is a common theme in Steinbeck’s work, and is certainly present in Cannery Row.
Whilst there is a maxim that the perfect committee size is one person, it seems we achieve more as people when we collaborate than when we are individualistic. A lesson indeed.
This month, let us turn to Steinbeck himself to start our inspirational quotes:
Try to understand each other. You can’t hate men if you know them.
Some thoughts on opinions:
Everything we hear is an opinion, not a fact. Everything we see is a perspective, not the truth.
Opinions are like backsides. We’ve all got them, but it is not always wise to air them in public.
On to this month’s humour. This was an advertising slogan suggested by Chris Addison on Mock the Week:
Do you suffer from unsightly chest hair? Should have gone to Pecshavers
After a wild night out with the girls, full of drink, drugs and wild sex, James’ wife Bev woke up to find herself next to an unattractive bald man.
|Before we go, we are delighted to say August was a record month in terms of people reading this newsletter. We are proud that so many people take the time to read our musings and thank you for doing so. We also thank those who forward on the newsletter to others who may be interested. We hope it remains relevant for you, and we welcome your feedback.
No man is an island, and whatever your work you are likely to be part of a team at some level – hopefully the points we have raised will help you improve performance in that team, especially if you lead it. If you want to explore how you can function better in teams we would love to coach you on that. If you have a team that needs some facilitated development to improve the dynamic, we’re pretty good at that too. And you’d know that one thing is certain – we’ll never give in. Side by side, hand in hand, we’d all stand together.
James Butler, Celia Champion and the Painless Team
© Painless Ltd 2011
Painless Business is a trading name of Painless Ltd.
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Painless Business helps people build the business they want. Through improving your strategic outlook and guiding you on sales, marketing and personal development we can provide renewed motivation and momentum in building your business.
Careful assessment of your needs ensures that the most appropriate intervention is supplied – whether one to one ongoing coaching, strategic reviews, training events or facilitated group exercises within a team.
To discuss how you can painlessly build the business you want, call us today for a no-obligation discussion of your situation.
Using Credit Reports
Credit Reports can be very useful and form one of the key parts of the vfdnet Licence. The main uses of Credit Reports are:
Prospects: See the Financial strength of the business, the Shareholder ages and respective Shareholdings. Use this valuable information to envisage what their issues might be.
Client Solvency: Put clients onto ‘Risk Tracker’ and so alert the client to changes in their Credit Rating. Review the changes for any chances to add value to client by improving their rating.
Director search: Click on a Director name to see the other businesses he or she is a Director of. Click through on non-Execs to see their further involvement in other businesses which might be leads for you.
Competitor Analysis: Review and tabulate Credit Report key details to build up a picture of a clients Competitors eg. Net Assets, Bank Charges, Approx Turnover (= (Debtors / 2) *12) Shareholdings, Director movements.
Creditsafe: link to Demo site http://www2.creditsafeuk.com/?id=3895
NB. vfdnet will be co-ordinating a group scheme with Creditsafe (or another provider) which will run from 1 January. Please harmonise your Credit service to this date to enable easy joining. Please email me if you would like more info on our Group scheme.