Case Studies

Case Studies

Real-life examples of how we have helped businesses achieve their goals

Rickard Luckin has a number of specialist departments.  In addition to providing services for our existing clients we are often asked to assist in cases where an independent opinion or specialist advice is required.  We are very happy to work with other accountants and other business owners.  We do have considerable expertise in a number of specialist services and businesses and other accountants can be confident that we can attend to all relevant matters at the same time, enabling the existing accountant to maintain his relationship with the client.

If you would like any further information about any of our specialist services please contact us.

Business tax

Our client, a distributor, had a shareholder who was coming up retirement and their intention was to pay him some cash at the date of retirement and some over a period of two years. In order to achieve this, their intention was to effect a share buyback by the company. We advised that provided certain qualifying conditions are met such a buyback is treated as giving rise to a capital gain for the shareholder and we helped to structure the buyback to ensure that the necessary company law and taxation requirements were satisfied.

We also identified that while the shareholder held more than 5% of the company’s ordinary share capital which, on the face of it, ought to have qualified him for entrepreneurs’ relief there was a second class of shares with limited rights which were only held by some shares. The existence of these shares meant that the shareholder would not qualify for entrepreneurs’ relief. Fortunately we were able to advise how the company could restructure its share capital so that necessary criteria could be met.

After we obtained the necessary clearances from HM Revenue & Customs the share buyback was able to proceed.

We were approached by a client who had received a tax assessment for landfill tax to the sum of £2.5m.  This was an unexpected shock to them.

We were able to liaise with HMRC on our client’s behalf to establish the situation and use our knowledge of landfill tax legislation to argue the case.  We spent a number of months reviewing our client’s records in detail – looking at their licences and contracts, reviewing and summarising tonnages of materials put into landfill and the types of materials.

We successfully contested the tax assessment and reduced our client’s tax liability from £2.5m to £400k.  We also agreed with HMRC that interest and penalties of £145k should not be applied.

We were approached by the solicitors for a group of UK and overseas investors who were buying UK commercial property through a UK company because they were having an issue with the vendor of the property over its VAT treatment. We were able to satisfy the vendor’s advisors that the sale of the property qualified as a transfer of a going concern, therefore, avoiding the need for the investors to pay and recover VAT and reducing their stamp duty land tax costs.

After further discussions with the investors we explained to them that they were potentially able to claim capital allowances on part of the cost of the property and have worked with them on subsequent acquisitions of property to maximise capital allowances claims. We have also worked with them on alternative structures to hold the properties to reduce the exposure of the overseas investor to UK tax.

Charity

How declining years and quality of work was seriously impeding a charity client.

Caroline Peters, Rickard Luckin’s charity specialist, explains the difficulties faced when dealing with a charitable client with an income in excess of £200,000.

Having acted for many years as an independent examiner on behalf of the firm, this role had become increasingly difficult as the charity’s accountant grew older and the quality of the records less reliable.

Difficulties that arose in respect of the annual examination, initiated discussion with the Chairman and Chief Operating officer of the charity.  This would require them to make changes within their finance function – to both assist internal monitoring and reporting, in addition to improvements to the annual accounts production process.

Caroline’s proposals and recommendation were:

The charity accountant be gently persuaded to retire and a new bookkeeper appointed.

  • The accounting system changed from an excel spreadsheet basis to Sage to improve financial control
  • Quarterly accounts produced for Trustee meetings – where none had been produced before
  • We would assist the charity with budgeting and grant applications
  • We would work with the bookkeeper to assist them in developing a format suitable for production of management reporting to the Trustees

The happy conclusion, following these recommendations – twelve months on, they are receiving regular and accurate financial information from the newly implemented Sage system and quarterly accounts produced and reviewed at Trustee meetings, so aiding their decision-making.

An International Organisation that acted in a similar manner to other Charity Organisations was struggling to achieve Registered Charity status.

Caroline took time to meet with the organisation to understand what they do and also why charitable status was important to them.  Caroline also reviewed the constitution as it stood and looked at the website and publications to identify any barriers that were preventing registration.  She could see that there could be a misunderstanding that the organisation worked for a particular industry rather than for the public benefit of promoting sustainable supply and use of resources for the benefit of mankind, which was the main concern of the Charity Commission.

Having satisfied herself that the Organisation acted as a charity, Caroline arranged the formation of a Charitable Company setting out the objects so that it was clear that they were of a charitable nature.  She liaised closely with the Charity Commission so that they understood the objects and Caroline sent them clear examples of how the charity met public benefit aims including:

  • the prevention or relief of poverty,
  • the advancement of citizenship or community development,
  • the advancement of human rights, conflict resolution or the promotion of religious or racial harmony or equality and diversity,
  • the advancement of education,
  • the advancement of health or the saving of lives and
  • the advancement of environmental protection or improvement.

The amendments to the objects and acceptance of the revised articles were just part of the issue.  Caroline also advised the charity to make it clear on their website that this was not an industry exclusive organisation and provide more information of its education and legacies.

The Charity Commission reviewed the revised application carefully, together with the additional information supplied, and Caroline was very pleased to be able to inform the organisation that the Charity Commission was satisfied that the organisation is charitable and operates for public benefit and therefore registered it as a charity.

As part of the process, Caroline also identified particular parts of the income that were trading and exceeded the limits allowed.  Advice was therefore provided to establish a trading subsidiary and to donate the profits to the charity, thus addressing potential corporation tax issues.  In addition our VAT specialists have been dealing with the complex VAT issues surrounding the organisations.

Corporate finance

The client was a private company with a small firm of accountants acting on their behalf.  The client was approaching retirement age and had identified a potential buyer from overseas for the business and negotiated an outline value for the business but was unclear whether this represented good value.  They approached us for our assistance and advice.

We reviewed the historic and projected financial information for the client and identified a number of proprietorial and non recurring or exceptional costs which would not be relevant to the client’s profit stream after the acquisition and an area of sales department malpractice which had adversely affected the gross and net profit of the company.  This enabled us to present an improved profit trend to the buyer.  As a result the client achieved an uplift in consideration over the original offer of 33%.

In addition we assisted in drawing up Heads of Agreement and provided advice on the commercial terms of the share purchase agreement and assisted the client in negotiating key terms and conditions, in particular with reference to accounting and tax matters including warranties and indemnities.  As a result the warranties and the indemnities were significantly reduced in favour of our client.

Transaction size £2m

The client’s were  managers at a large company who had come to the conclusion that they could no longer work to their satisfaction under the existing regime and wished to leave and take clients with them to set up their own business.  There were a number of clauses in their contracts of employment which prevented them doing so.  In addition they needed finance to fund them through the set up period of the new business.

We reviewed their contracts of employment and gave feedback as to the issues which we felt were likely to be brought up in their negotiations with their current employer and in addition liaised with their lawyers on these matters.

In addition we assisted in the preparation of a business plan and its presentation to a number of sources of finance and assisted negotiating the funding to enable them to set up.  We also advised them on the tax treatment of certain payments due under their exit agreement.  We also helped establish an accounting system for their new business and in addition we advised them on the agreement they were proposing to sign with a “host” company with whom they intended to have an ongoing relationship  and which would carry out  regulatory work on their behalf.

Transaction size £500k

Over many years the number of shareholders in a very substantial private company had grown as the controlling family had extended.  The current executive directors were concerned that as further time passed so the shareholders would become more and more diverse and the business may pass out of family control.  The executive directors proposed a scheme to retain control of the company by converting certain of the ordinary shareholder’s shares into preference shares with restricted rights.

Certain of the directors acted as trustees on behalf of trusts holding ordinary shares in the company which would  be subject to this scheme and wanted comfort from an independent source that it was not unreasonable for them to recommend acceptance of the proposal on behalf of the beneficiaries of the trusts.  We were asked to provide independent advice and an opinion.

We indicated that we felt the yield proposed on the preference shares was not adequate and that there should be an intention to redeem the preference shares over a reasonable period of time, commensurate with the ability of the company to fund a buyback of shares and additionally we commented on the safeguards which we felt needed to be built into the legal documentation supporting the restructuring on behalf of those converting from ordinary shares. In addition we advised on the drafting of the circular to be sent to the shareholders to explain the proposed restructuring.

Transaction size £12m

An overseas group was looking to acquire a business in the uk and was looking for comfort as to the financial information being provided by the target company.  We reviewed the recent accounting information of the target company and identified a number of areas where potential adjustments to the purchase consideration may be needed and where there was the potential for additional liabilities to arise.  In addition we advised on the heads of agreement and the accounting ramifications of the transaction.  We also reviewed the completion accounts to confirm that they had been drafted in accordance with the contract for purchase and to identify areas where the price paid needed to be adjusted.

Transaction size £1.5m

We were engaged by a client to assist in the purchase of a substantially larger business than their existing one including securing adequate finance to fund the acquisition.

We advised on drafting heads of agreement, assisted in preparing a business plan to support the funding proposal, provided support in negotiations with the providers of finance and provided financial due diligence into specified aspects of the acquisition target.  In addition we provided support in connection with the share purchase agreement including advising on commercial terms and warranties and indemnities.  We also advised on the legal agreement between the funders and the purchaser, including on the ramifications of the lending covenants proposed.

Transaction size £2.25m

A client engaged us to advise on the acquisition of a key competitor.

Our engagement included advice on an appropriate acquisition structure, initial financial due diligence on the target and the financial projections for the combined business post acquisition.  In addition we assisted in negotiating heads of agreement between our client and vendor group and negotiating funding with venture capitalist.

Transaction size £10m

We were engaged to assist the management team to acquire a business from its owners and to raise funding to enable the buyout to proceed.

We advised on the valuation of the business, advised on structuring the acquisition and the components of the consideration and drafting the heads of agreement with the vendor.  We also advised on the preparation of a business plan for submission to funders and assisted negotiate appropriate funding with a chosen provider.  In addition we assisted the management team with the negotiations of the share purchase agreement and contract with the funder.

Transaction size £35m

We were engaged to assist in the sale of a company by its principal shareholder.

We assisted in the preparation of a sales memorandum, negotiating the heads of agreement and supported the client through the negotiation of the share purchase agreement in particular advising on its commercial terms and financial warranties and indemnities.

Transaction size £4m

We were engaged by a funder to provide financial due diligence on a customer it wanted to lend funds to, to acquire a major competitor.

We provided financial due diligence on the acquisition target and the financial projections for the combined business and advised on the proposed structure of the transaction and the sustainability of the company’s earnings.

Transaction size £10m

We were engaged by a client to provide financial due diligence on a proposed acquisition.

We investigated and reported on the financial history and projected results of the target and the proposed pre-sale restructuring within the vendor group required to enable target to be sold.  In particular our report covered key tax issues arising from the restructuring and their potential impact on our client.  Our work also included support throughout the negotiations to agree the share purchase agreement with particular emphasis on the financial warranties and indemnities required.

Transaction size £17m

We were engaged by the directors of a company to assist in the sale of a company and to help explain the sale to the shareholders.

Our work included advising on the drafting of the heads of agreement, supporting and advising the directors throughout the negotiation of the share purchase agreement and advising the directors in respect of the circular sent to shareholders explaining the transaction and its ramifications.  We also provided tax advice to the shareholders and accounting support in the preparation of pro-forma financial information for inclusion in the circular to be sent by the purchaser.

Transaction size £10m

We were engaged by a client to advise on the sale of their business, to a venture capital backed foreign buyer.  We acted as an interface between the corporate finance boutique also advising and a liaison for the other professionals engaged by our client.

Our work included advising on the value received by the vendors, providing accounting information required by the purchaser and how to deal with the ramifications of tax planning schemes previously entered into by the vendors as well as advising on the commercial terms of the share sale agreement, the terms of partial rollover of consideration into the acquiring entity and the commercial terms of the shareholder agreement and directors service contracts for the vendors who were remaining with the business post sale.  We also assisted with the completion accounts.

Transaction size £44m

We were engaged by a client to advise on the sale of their business, to a venture capital backed foreign buyer.  We acted as an interface between the corporate finance boutique also advising and a liaison for the other professionals engaged by our client.

Our work included advising on the value received by the vendors, providing accounting information required by the purchaser and how to deal with the ramifications of tax planning schemes previously entered into by the vendors as well as advising on the commercial terms of the share sale agreement, the terms of partial rollover of consideration into the acquiring entity and the commercial terms of the shareholder agreement and directors service contracts for the vendors who were remaining with the business post sale.  We also assisted with the completion accounts.

Transaction size £44m

Specialist Services

We were approached by a client who was considering setting up a new motor dealership.  They already had one dealership but were looking at setting up a new Franchise.

We helped our client prepare a detailed business plan and financial projections to present to the Motor manufacturer and to the Bank.  We attended various meetings with the Directors and assisted our client in securing the Franchise and raising the necessary finance.  We then supported them in finding a contractor to carry out the building works.

For the months and years following the launch of the new dealership, we prepared management accounts and compared these to the original projections, analysing any variances.

We had acted for a Group of Companies for many years.  The Group consisted of two very different businesses – motor dealerships and the leisure industry.

As the next generation of the family inherited the shares in this Group, it was soon evident that the new shareholders had very different interests and goals.  Rickard Luckin worked closely with the shareholders to try to help them resolve their differences in order to move the companies forward.  Eventually, it was decided the best way forward was to separate the Group and allow certain shareholders to pursue the areas of the business of most interest to them and to allow other shareholders to exit the Group completely so they could pursue personal business interests.

Rickard Luckin’s tax team successfully demerged the Group, mitigating the tax consequences along the way.  We liaised with the Group’s Bankers to secure the necessary finance and worked closely with the Group’s lawyers to arrange the paperwork.  Rickard Luckin oversaw the transaction and acted as liaison between the shareholders, lawyers and bankers. This meant the various shareholders, who were located around the world, had one point of contact saving them considerable time and stress.

The demerger and restructure resulted in the shareholders achieving what they each wanted and left them able to pursue their own goals.

We act for a company who operates a ferry.  The Directors are required to submit an application to the Department of Transport in the event they wish to raise their toll charges.  This usually takes place every two to three years and inevitably a public enquiry results due to opposition from local residents.

Rickard Luckin worked with the Directors to develop a comprehensive forecast model looking ahead nine years taking into account the seasonality of traffic volumes and vehicle/passenger types along with the impact of income on the biennial ferry refit.  The projections were produced based on the two scenarios of the Company being granted an increase in tolls or not.

By comparing the two scenarios, Rickard Luckin were able to demonstrate how not having a toll increase would impact the owner’s rate of return and the ability of the company to afford to replace the ferry in accordance with the recommendations of their marine architect.  A key argument was that, in the absence of an increase in the tolls, the owner would be able to get a better rate of return by liquidating their assets and putting their money in a high interest account.

These key arguments helped demonstrate to the Department of Transport that the toll increases were reasonable.

On a number of occasions, we have prepared the application and supporting financial projections on the Directors’ behalf.  We have attended the public enquiry and answered questions in relation to the application and helped the Directors achieve positive outcomes to their applications.

Early in 2011 Patrick Clark from Barnes Clark of Tiptree LLP, Chartered Certified Accountants, contacted Peter Warren, Tax Director at Rickard Luckin to request some specialist independent share valuation advice on behalf of one of his clients.  As part of the agreement it was necessary for the share valuation exercise to be carried out by an independent third party.  Following on from this Peter also advised Pat’s client in relation to some tax planning regarding succession of the business due to some unusual complexities that required particular consideration. Peter advised Pat that Rickard Luckin could also assist with the specialist statutory work arising from the various transactions.

The background of the case was that the company had four shareholders, one of whom is resident abroad and one who had recently passed away and had left his shares to his widow. It was intended that the company would buy these shares back from the widow and that, as part of the succession planning, there was to be a gift of shares from the non-resident shareholder to the two remaining shareholders. Therefore, in addition to the share valuation advice, it was necessary to attend to all statutory matters associated with the company purchase of own shares and certain aspects of the overseas tax matters for the non-resident.

In addition to the matters normally associated with share transfers, we were asked to assist with the share agreement and the terms of the share purchase and to prepare all necessary documentation relating to the purchase of own shares by the company. All matters were completed very satisfactorily in a relatively short time scale.

Patrick Clark comments:

‘Whilst we feel that, as general practitioners, we have a wide range of general skills there are occasions when we come across unusual or particularly complex matters. We care passionately about our clients and want to ensure that they are looked after properly and professionally. It has therefore been a pleasure to strike up a relationship with Peter’s firm as their ethos towards their clients fits well with our own. The fact that we have been able to call upon their specialist knowledge has been invaluable to us. I was particularly pleased that the involvement of Rickard Luckin was seen as a positive move by our clients and gave them a feeling of confidence knowing that all parties were working together in their best interests’. 

Forensic accounting

We were asked by instructing solicitors to advise on the potential loss of profits suffered by a young farmer following a motor cycle accident.  The injuries suffered were such that he was unable to look forward to taking the farm over from his father in due course.

The farm had rudimentary records and had prepared no recent accounts. We prepared pro-forma accounts using the records available and sector knowledge to fill in the gaps, together with projections forward, enabling us to calculate a level of profits that the farmer would forgo.

This was used as the basis for a claim against the other part in the accident.  The matter was settled out of Court following agreement on the conclusions we had reached between ourselves and the financial expert acting for the defendant.

We were instructed by solicitors acting for both parties with a view to advising on Capital Gains tax issues in the event of a divorce or separation.

Our remit covered the quantification of the net asset value of the couple with a view to the most beneficial timing for transfer of assets, whether pre or post separation, and advice to the lawyers and the couple to determine what assets should go to each party.  Our work also considered potential gains that might arise on a future sale.

The case involved several buy to let properties and a holiday home as well as the couple’s principal private residence.

We are often asked to provide a share or business valuation acting as an Expert Single Joint Valuer for the Courts, typically in divorce situations.  Our work will consist of gathering the information we require to establish our opinion of value which may well include interviews with the parties involved and the preparation of a report to comply with the requirements of the CPR.  All information used and opinions provided are shared with both parties to the dispute.

Our work in this connection may also include advising on the tax ramifications of the proposed method of resolution, and how the resolution may be structured and funded.

The situation revolved around the local council authorising extensive pavement and road alterations which became long term outside a successful retail ironmongery business which it was contended ultimately contributed to its insolvency.

A forensic report was commissioned to quantify how the profitability of the business had changed following the commencement of the works.

We reviewed the business’ results for an extensive period prior to commencement of the works and in the period  post works up to the time the business became insolvent and provided our view on a suitable compensation figure to be paid.

We were asked to assist in the quantification of a purchases based fraud by a company’s financial director.

Our work included reviewing the accounting records of the company for an eighteen month period, identifying suspicious transactions and tracing them to source documents and establishing whether or not they related to business costs.

Our work led to the recovery of funds from the perpetrator of the fraud.

We were engaged to advise a party to a Matrimonial dispute on the level of income and assets including a number of bank accounts controlled by the other spouse.

Our work included a review and reconciliation of the profit sharing arrangements the other spouse was party to, to funds received, tracing income payments to a number of bank accounts and identifying undisclosed bank accounts and following payments through to source documentation.

Our review of the other spouses’ expenditure over a two year period identified various items of a capital/investment nature resulting in additional undisclosed value being bought into the ultimate settlement pot.

We were asked to assist a fifty per cent shareholder in a business who had been excluded from the management of the company by the other fifty per cent shareholder and who was no longer in receipt of dividend or other income arising from his executive duties in the company which had also been terminated.

Our work included liaising and interfacing with the other professional advisors involved on both sides of the dispute, reviewing accounting information provided by the company to ascertain how its results were being calculated since the alleged unfair prejudice had taken place, advising on the alternative share valuations provided by both sides to the dispute, advising on a suitable structure and mechanism to deal with the buyout of the injured party’s shares and assisting him client in the mediation process which eventually resolved the dispute.  As a result the client received a very substantial settlement in return for the sale of his shareholding in the company.

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