Solutions for the end game by Bob Hair
including HSBC and Royal Bank of Scotland, are to be questioned in the US for alleged manipulation of rate, too. The global banking group, Standard Chartered, has reached a $340m settlement with New York’s bank regulator over transactions linked to Iran. Could your business withstand the scrutiny of shareholders, lawyers, regulators and the media if it were ever placed in the spotlight over a bribery or corruption allegation? If you’re concerned your business could be exposed to the risks of bribery and corruption, you’re encouraged to participate in the anti-bribery e-learning series that the IoD has developed with E-Security Exchange Ltd. The e-learning series conforms to Principle 5 of the Government Guidance of the Bribery Act (ie, communication, including training, to prevent bribery). The units offer practical guidance for ensuring that ethical behaviour and compliant procedures can be embedded into working practice. They are delivered in short segments, therefore minimising disruption to productivity, and divided into those that may be suitable for line managers and above as well as staff in nonmanagerial positions to ensure awareness is disseminated throughout the organisation. Now that the British Standards Institute has issued BS10500 as an Anti-Bribery Management System, adherence to the standard is likely to form an essential requirement from organisations issuing tenders. Our e-learning can help you comply with the Bribery Act and place you at an advantage when bidding for new business. Want to know more? For further details, please phone E-Security Exchange Ltd at 0141 255 0987 or info@esecurityexchange.com
Relatively speaking... the immorality of tax avoidance is very much de rigeur. With the recent “outing” of public figures who are engaged in opaque tax schemes, the dawn of an age of austerity which has galvanised governments all over the world to aggressively raise and pursue taxes, and hardened public opinion towards the plight of over-taxed high earners in an environment where everyone is feeling the pain, you could be forgiven for thinking tax is only synonymous with bad news. There are, of course, still many ways of reducing the taxman’s slice of your hard earned cash, but for business owners, and particularly those considering the issue of succession planning with their business, some attractive options are available which are, in some cases, actually quite generous. Take Entrepreneur’s relief, for example. The radical shift in the capital gains tax (CGT) landscape on 23 June 2010, which increased the headline CGT rate to 28 per cent, had far-reaching effects for owner-managers contemplating a future sale of their company. However, “Entrepreneur’s Relief ” (ER) was simultaneously enhanced, enabling sellers to obtain a 10 per cent CGT rate on their first £5m of eligible gains, and this has subsequently been increased again to £10m. This means that ER is now capable of producing tax savings of up to £1.8m. Against the current backdrop of our penal tax rates, the low 10 per cent ER rate now becomes a very valuable tax break when compared with a top tax rate of 50 per cent for income tax. So, relatively speaking, Entrepreneur’s Relief is a pretty big deal for all business owners, because you don’t need to have gains of £10m to qualify. The availability of ER will invariably be the most important tax consideration for owner-managers when preparing for the sale of ‘their’ company. However, the interaction of ER with the other CGT rules affecting company share sales must be carefully understood and planned for to ensure the full benefit of the ER is realised. There are other planning options for those seeking an exit, or perhaps just a solution to help them pass on the business to the next generation: Pensions. Boring to some, but conventional wisdom has its place – save at sensible levels throughout working life, funding pension contributions through the business and accumulate enough to retire without having to sell the business, or being totally dependent on doing so. Given changes to the pensions regulations, this needs to be done over time with a sensible target in mind, and with ‘auto-enrolment’ just around the corner, all business owners should be looking closely at their pension arrangements in any case; Management Buy Out – aligning the interests of all in a family-owned business can be extremely tricky, and adding in the expectations of management brings another layer. A clean exit can be made through an MBO, but this usually depends on capital being available. If funds cannot be immediately available, it is possible to build in substantial “earn out” terms which can be taxed at the 10 per cent rate; Remuneration strategies – in many cases, “keeping it in the family” will be the prevailing condition for a family owned business. Shifting control of the business to the next generation is intensely personal, but having a sensible arrangement in place for the transition can be achieved. With careful planning and sensible guidance through all of the options, all things are possible. Relatively speaking, of course. • Bob Hair MIOD is executive director and head of financial planning at Turcan Connell Asset Management, a leading wealth management and tax adviser to individuals, families and charities.
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