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FINANCE
DIRECTORS’
UPDATE
Spring 2015
Accounting update for corporate businesses
INSIDE:
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Catching the
Trade Winds
Energy Savings
Opportunity Scheme
Corporate Finance
Deals
Head in the sand
on UK GAAP?
Now’s the time to take it out.
For accounting periods beginning on or after 1 January 2015 a new
accounting standard FRS 102 is in place for medium and large companies.
This standard replaces all existing UK accounting standards.
In the short term small companies can continue to adopt the FRSSE, albeit
The transition date has passed and whilst this may start to send a few shivers up the
there are changes to this standard for accounting periods beginning on or
spine of even the most laid back finance professional you still don’t need to panic.
after 1 January 2015. In the long run small companies will also fall under the
The extent of the changes will vary from company to company and which transition
scope of FRS 102 which will mean consistent recognition and measurement
differences have the biggest impact will depend on the individual circumstances of
requirements across all entities but with a different disclosure regime to
each company.
medium and large companies.
You therefore need to perform an impact assessment to understand what the effect
In summary the key accounting differences are likely to be as follows:
of the new accounting standards will be on your statutory accounts, in particular
• Requiring more intangible assets to be recognised separately from
on your distributable reserves, so you can start to talk to investors, shareholders and
other readers of the accounts to ensure there are no nasty shocks at year end. In
goodwill when there is a business combination
• Assumption that the useful life of goodwill and intangible assets shall not • Requiring investment properties to be carried at fair value with addition you need to review any future transactions or arrangements to consider
how these will be affected under the new regime i.e. banking arrangements,
exceed five years when no reliable estimate can be made
revaluation gains and losses recognised in profit or loss whenever fair
forward contracts, acquisitions, leases etc. Tax is also another factor that needs to be
reviewed as a number of these changes will have tax implications.
value can be measured reliably without undue cost or effort
• Transitional arrangements for property, plant & equipment and investment property to use a fair value as “deemed cost”
• Requiring additional deferred tax to be recognised
• Accounting for accruals for short-term employee benefits
Conversion to a new set of accounting standards is about more than just the
numbers. If you would like further information on what we can do to help you
to minimise the impact of these significant accounting standard changes please
contact us.
• Introducing a new regime for financial instruments where financial instruments are classified as either “basic or other” which will determine whether they are recognised at amortised cost or fair value
• Recognising lease incentives over the lease term rather than spread over the shorter of the lease term and the period to the first market rent review
• Requiring interest free loans that do not bear any interest to be stated at an amortised cost figure
• A foreign currency transaction is translated by applying the spot exchange rate at the date of the transaction, not the forwarded contracted rate.
For further information, please contact
Fleur Lewis, Corporate Services Partner
01392 448800
[email protected]
Catching the trade winds
Venturing into the global market for expanding companies
is rich with opportunities.
Trading on the international stage brings rewards
from diverse markets, though careful planning is
required if those new found profits are not to be
consumed by unforeseen taxes and penalties.
The OECD is currently developing its Base Erosion and Profit Shifting (BEPS)
It is perfectly legitimate for companies to engage in reasonable tax planning
The fluidity of capital and the rise of the digital economy have created
that is aligned with their commercial and economic activities and which does
significant problems for governments around the globe and tax systems
not lead to an abusive result.
have struggled to keep up with the new reality. With the help of the OECD,
project. This seeks to prevent tax planning that exploits gaps and mismatches
in tax rules between different countries to artificially move profits to low or
no-tax jurisdictions where there is little or no economic activity.
The EU is conducting a similar review.
they are now fighting back, armed with new tools to ensure profits are taxed
Companies expanding overseas should take advantage of all relevant and
where they are made.
available tax incentives and exemptions, as well as structuring commercially
driven transactions and business operations in the most tax efficient manner.
And in the UK we also have seen the new Diverted Profits Tax which mirrors
the aims of BEPS.
Companies can also enjoy a smoother journey through international waters
by ensuring that they consider the impact of overseas tax rules, including
Companies trading overseas which are not familiar with these developments
the potential cost of withholding of local taxes from payments such as debt
or who fail to plan ahead run the risk of incurring penalties and extra taxes
interest, royalties, dividends, licence fees and services. The UK’s Double Tax
that could have been avoided. The need for professional advice is therefore
Treaty network is extensive and companies need to secure the available
vital to avoid costly mistakes and to ensure a global presence is a rewarding
reliefs and have regard to the relevant guidelines of the Organisation for
one.
Economic Co-operation and Development (OECD) for dealing with cross
border matters such as establishing a taxable presence overseas and inter
For more information please contact
company pricing arrangements.
Nigel Warren, International Tax Partner
01392 448800
[email protected]
The latest finance news from Bishop Fleming Chartered Accountants
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VAT Matters
Change in treatment of prompt
payment discounts from 1 April
2015
On 1 April 2015 the VAT accounting
treatment of prompt payment discounts will
change.
Complying with the
Energy Savings
Opportunity Scheme
If you are a large organisation then you need to be
aware of ESOS – the Energy Savings Opportunity
This change does not affect the VAT treatment of retrospective
discounts or rebates which are calculated by reference to the volume
Scheme, which came into effect in July 2014.
of transactions etc and generally accounted for by the separate issue
of invoices or credit notes.
What is it? ESOS is a policy aimed at increasing energy efficiency, thereby improving
profitability and mitigating climate change.
Under the current rules, a sales invoice for £10k plus VAT which
offers a 5% discount for payment within 30 days would have output
Does it apply to me? ESOS applies to large UK undertakings and their corporate
VAT calculated on the discounted amount (ie 9,500 x 20% = 1,900),
groups. It mainly affects businesses but can also apply to not-for-profit bodies
regardless of whether the discount was taken or not. From 1 April this
and any other private sector undertakings that are large enough to qualify. An
treatment will no longer be possible, and HMRC are suggesting two
organisation qualifies if, on 31st December 2014, it carries out a trade or business
different ways in which prompt payment discounts on sales invoices
that either:
can be treated for VAT:
• Employs at least 250 people, or
• Sales invoice issued for the full sales value without any • Employs less that 250 people but has an annual turnover in excess of 50 million discount, and credit note issued where discount is taken, or
• State on the invoice that no credit note will be issued if the euro, and an annual balance sheet total in excess of 43 million euro.
discount is taken. If the customer takes the discount, the supplier will Regardless of whether employed part or full-time, the number of employees means
only be able to reduce the amount of VAT paid to HMRC by being
the average number of people employed by the undertaking in the year. The rate of
able to demonstrate, by reference to evidence of payment, that a exchange taken is the Bank of England’s spot rate on 31st December 2014.
reduced payment was received. The HMRC business brief attached includes some specific wording for inclusion on these invoices.
What does it mean? If you qualify for ESOS but your organisation is not covered
by ISO 50001, you will need to carry out an ESOS assessment every 4 years that
Businesses which offer prompt payment discounts will need to
will measure total energy consumption, highlight areas of significant energy
consider how they will change their invoicing and accounting
consumption, and identify energy saving opportunities. Assessments must be
systems to comply with the new requirements, and those which take
signed off by a qualified ESOS lead assessor and the Environment Agency must be
advantage of discounts on their purchases will need to make sure that
notified of compliance by 5th December 2015. Failure to comply carries the risk of
they reduce their VAT claims when they take a discount.
fines up to £50,000.
Where can I get more information? The Environment Agency is the UK scheme
administrator. Further details can be found at - https://www.gov.uk/energy-savingsopportunity-scheme-esos .
For more information on any VAT matter, please contact our specialist
VAT team.
Wendy Andrews, VAT Director
01392 448800
[email protected]
Robert Bailey, Tax Director
01872 275651
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[email protected]
For more information please contact
Ewan McClymont, Grant Services Director
01872
01872 275651
[email protected]
The latest finance news from Bishop Fleming Chartered Accountants
Transaction highlights
In 2014, Bishop Fleming advised on over 30 deals with an aggregate value in excess of £200million. Here are a selection of those transactions:
Warrens Bakery
Asteral Group
ITC Luxury Travel
Speciality Fasteners
Fundraising
Provided due diligence services
in support of fundraising from
Santander Growth Capital.
Business Sale
Provided advisory services to the
Brook Henderson Group and its
shareholders on the disposal of a
controlling stake in Asteral to
Permira Private Equity.
Management Buy Out
Advised the shareholders in the
Management Buy Out of ITC,
backed by Paul Pindar, former CEO
of Capita PLC, and Santander.
Business Sale
Acted as the lead adviser on the
sale of Speciality Fastners &
Components Ltd to the
IS Group.
The Woods Group
Succession Group/
Cornerstone Lifestyle
Succession Group/
Hopkinson Associates
Jaspers (Treburley)
Management Buy Out
Provided advisory services on
Management Buy Out of Woods
Group.
Acquisition of Cornerstone
Lifestyle Planning
Due diligence advisory services
on acquisition of Cornerstone
Lifestyle Planning.
Acquisition of Hopkinson
Associates
Provided due diligence
advisory services on acquisition
of Hopkinson Associates.
Business Sale
Acted as lead adviser on the sale
of the company to Dawn Meats
Group.
Exmoor Ales
Project Mariner
Jacaranda Productions
Go Entertainment Group
Fundraising
Advised on fundraising from HSBC
and the Regional Growth Fund to
support the growth of the
production facilities.
Equity Fundraising
Advised on the venture capital
backed equity fundraising to
support start-up phase and capital
expansion.
Business Sale
Advised the shareholders on the
sale of Jacaranda Productions Ltd to
Communisis PLC.
Business Sale
Advised the shareholders on the
sale of Go Entertainment Group
to AIM listed Litebulb Group.
Women in Business Survey 2015 - Make your voice heard!
In 2014 we produced the South West of England Women in Business survey
which provided the first report of its kind in the region to give a snap-shot of the
Thank you to everyone who has
thoughts, opinions and issues for women in business in the South West.
participated in our survey so far. Please
This year we have created a new survey which asks women in business in the
do forward this survey to other business
South West what working life is really like for them – and what can be done to
women in the West Country who you
help them.
think would like to take part.
The survey will take about 5-10 minutes to complete, and we appreciate your
giving the time to take part.
The results will be collated into a report that will be available to read for all.
You can take our Women in Business
Survey 2015 here:
www.surveymonkey.com/r/WIB2015
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This newsletter provides an overview of the regulations in force at the date of publication and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining
from action as a result of the material can be accepted by the authors or the firm. Bishop Fleming is a trading name of Bishop Fleming LLP, a limited liability partnership registered in England and Wales No. OC391282. Registered office: Stratus House, Emperor Way, Exeter Business
Park, Exeter, Devon, EX1 3QS. A list of members’ names is available at the above address. Copyright © Bishop Fleming LLP 2014. All rights reserved.