Helping our client to ‘Take the Floor’.

Phil with Alistair on takeover of Studio DeVere

The initial enquiry

iBOSS was approached, by a legal advisor contact of ours, to help a client of his, who was considering purchasing a well-established retail business. That business is based in Cambridgeshire and trades under the name of Cambridge Interiors. This was a ‘retirement sale’ of a company involved in selling curtains, carpets and other flooring materials. It has been in existence for some 30 years with a solid customer base.

Following an initial consultation with Alistair, the client, we agreed to help him to produce a business plan for the acquisition and development of the business.

The investigation process

Initially a request was made for historical financial information from the seller (sent under an NDA). iBoss reviewed the information provided. Financial analysis quickly identified that the asking price was significantly too high based on the historical financial performance. Furthermore, the seller also wanted ALL the consideration paid ‘up front’.

Before preceeding further, we worked with Alistair on developing a business plan to assess the future viability of the business.

As a result, IBOSS advised the client that, on this basis, we would not recommend that the client acquire the business. He was determined, however, that he wanted to buy the business. Before preceeding further, therefore, we worked with Alistair on developing a business plan to assess the future viability of the business.The result was that there followed a period of several weeks of negotiations, based on the conclusions from the plan. These took place between between our client, his lawyer and the seller.

The Deal

A deal was agreed with the Seller on the following basis:

  • An asset purchase agreement not a share purchase.
  • The final agreed purchase price was significantly below the originally advertised asking price.
  • On completion the initial payment was based on the value of the assets acquired. The remainder of the consideration ‘Goodwill’ was structured on a deferred basis against agreed performance targets.

This resulted in the buyer having no requirement to borrow any money as, with the reduced price and deferred terms. he had sufficient resources to buy the business and provide the initial cash flow injection required.

A few problems

It was also noted, however, that there were a number of other problems to overcome. Specifically:

  • Whilst our new client had a sales and marketing background, it was not in retail. The Directors of iBOSS, on the other hand, do have this experience. We were comfortable therefore in advising on this type of business.
  • One particular problem was the trading name of the current business. This had not been registered originally and subsequently (some years later) someone else had registered the name. Thus our client was obliged to register his business under a different name. This raised promotional problems in carrying over the existing ‘goodwill’.
  • The Seller was well known and respected in the local area. He was not, however, up to date either in terms of IT. This applies to both business data, and the promotional benefits of social media. Luckily our client is.
  • Our client had many ideas, both in terms of promotion and expansion of the product range. What he needed, however, was our expertise in developing thess into a proper, logical plan. Exactly what iBOSS is about!
  • There were a number of ‘legal’ matters. These were comprehensively covered by his legal advisor, who we are very comfortable working with.

A satisfactory result

The end result was that terms were agreed with the owner and the various members of staff. The purchase has now been completed and our client has taken over the business. He is delighted with the outcome and can now focus on implementing the changes he needs to achieve his growth plans. This includes upgrading the business into a supplier of high-quality interior design, fittings and furnishings. It will cater for for both industry and domestic use. iBOSS will, of course, be on-hand to provide further help and advice as and when needed. . If he needs further funds to support future growth this can be arranged through our associate company Business Finance Services (www.bufinserv.co.uk).

In conclusion

The directors of iBoss believe the lower end of the business sale market is not well served by some Business for Sale websites. We advise caution when trying to buy a business. Make sure to get professional advice from an accountant, solicitor, corporate finance firm or, dare we say, iBOSS!

If you are looking at acquiring a small business simply contact Phil Jones by e-mailing him at phil@theiboss.co.uk . Alternatively, complete our enquiry form and take advantage of our offer of a free consultation.

Keeping company Tax records?

We must point out firstly that we, at iBOSS, are not accountants. Nevertheless we reproduce below information from TaxAssist Accountants that we think may be useful to SME owners/managers. It provides information on time-scales for keeping company tax records.

The implementation of digital software such as QuickBooks, Sage & Xero is helping to remove the requirement to keep company tax records . The implementation of MTD by the Government has also helped in this regard. Many SMEs, however, still have a lot of the paperwork used to support their accounts and tax. 

The question is – How long does the business need to keep this paperwork for?

In general terms, the answers are as follows:

Self-employed/partner in a partnership? 

Your tax records must be kept for at least five years after the 31st January self-assessment submission deadline. So, after 31st January 2024 you could dispose of your tax records up to the 2017/18 tax year).  

The records that you should keep for this time include business bank statements, sales and purchase invoices. Also all other documents supporting your accounts and tax records, such as petty cash records. If HMRC checks your tax return they may ask to see the documents. 

Beware, however -If you submitted your tax return late then the requirement to keep records may be longer. 

If the business is VAT registered? 

If your business is VAT registered, you’ll need to keep all VAT records for at least six years. 

Limited company? 

If your business is a Limited Company, you should keep all the tax and accounting records for six years from the end of the accounting period. If your year end is 31st March, from 1st April 2024 you can dispose of records for the 31st March 2018 year. 

Are you an Employer? 

If you’re an employer, you should keep PAYE records for three years from the end of the tax year. 

Paper or digital records? 

If your records are digital, there is no need to print and file these. Simply just keep the digital records safe and backed up. 

If you received the documents physically, then you can keep the records physically. Alternatively you can scan them in and record them with your other digital records. 

If you are uploading documents into your bookkeeping software, or storing them digitally, then you don’t need to keep the records elsewhere. You can dispose of the paperwork. 

Should I keep some records indefinitely? 

Some other records you may want to hang on to for longer. For example, if you’ve purchased a property, it’s important you keep the paperwork. This is in case you need to refer to it when you come to sell the property. Other paperwork relating to the purchase of assets may be needed for a capital gains tax calculation for example. 

It’s recommended that you keep a P60 for at least four years. Payslips, however, can be thrown away two years after the end of the tax year. 

Lost, missing or unreadable records? 

HMRC can charge you a penalty if your records are not accurate, complete or readable. 

If you are missing documents, then try to get replacement documents. Suppliers should be able to issue duplicate invoices. Banks can send copies of statements on request. While your employer or pension provider may not be able to provide you with a replacement P60, they can issue you with a statement of earnings. 

For more information on tax-related matters, follow this link to the TaxAssist web site.

Excessive taxation on UK high earners could backfire on the economy.

According to The Wealth Club (a retail investment firm) the UK’s top 100,000 taxpayers paid some 24% of all income and capital gains tax in 2021/22. Their average bill was in the region of £559,000. This is up 18% compared with the previous year. The top 100 earners paid an average £46m each. This is up by 14%. According to the Wealth Club income and capital gains tax on the top 100,000 has risen by 45% over the past 5 years.

Interestingly, this is supported by a recent report by PwC. They state that the UK’s largest listed firms saw their overall tax contribution increase to £89.8bn in the last financial year. This is the equivalent to 10% of total government receipts. Their analysis showed that the direct taxes borne by these companies rose by 9.9% to £29.bn. The main contributors to this increase included higher employment taxes and the energy profits levy. Despite this, capital investment from the top 100 firms remained above £25bn. The 100 Group, which employed 1.8m people, paid an average of just over £40,000 per annum to each employee.

The concentration of tax contributions from both top businesses and individuals makes the UK vulnerable to the departure of high-value taxpayers. This is the view of many senior executives.

iBOSS Comment:

The general consensus appears to be that Ministers should work towards creating a simpler and more competitive tax regime. This should be designed to prevent an exodus of big contributors. Simply increasing tax rates is not the solution. Increasing the turnover of UK businesses through incentivisation, which in itself will generate increased tax, is a much better way of growing our economy. Also persuading more UK-based pension schemes to invest in UK businesses rather than overseas ones, would be another positive move!
To learn more about the support and advice the iBOSS Team can provide follow this link. If business finance is what you need then follow this link to our Associate company Business Finance Services .

Successful hive out of a specialist division from a large Law Firm

The team at iBoss have increasingly become involved in projects that extend beyond their planning and advisory services. One recent example of this arose when we were approached by a Partner in charge of a specialist division within a prominent Law Firm. His employers offered him the opportunity to hive out his division, which was achieving annual billings of circa £4m, as it was decided that the service offering was one that the Law Firm, for strategic reasons, wanted to exit.

The Partner was keen to explore the opportunity but first wanted to ensure that this was a viable business opportunity. He also wanted to understand what terms could be agreed and what funding would be required for the new proposed Legal Firm. In order to be able to do this he engaged iBoss to prepare a Business Plan and Financial Forecasts. Once prepared, he discussed with two of the directors of iBoss how best to negotiate and structure a deal that would be acceptable to both parties. Fortunately with a willing buyer and willing seller the focus on the deal was not purely based on financial considerations but how a smooth transition of live client cases could be handled.

Once the Heads of Terms had been agreed the biggest challenge the Partner faced was how to set up the new business at the same time as he continued to run the existing division. In this respect the iBoss directors experience was such that they were able to become actively involved in setting up the new business, whilst the Partner continued his commitments to his existing firm.

Setting up a new solicitor’s practice has many challenges, not least of which is obtaining an offer of Professional Indemnity Insurance [PII], which is a pre-requirement, of applying for Solicitors Regulatory Authority [SRA] and SRA approval, which in turn is a pre-requirement of opening a bank account for a new solicitors practice. Both parties were keen to conclude a deal as quickly as possible, whilst the ‘regulatory’ matters were being dealt with and a plan was agreed to start the process of putting in the new place the infrastructure that would be required to ensure a smooth transition of clients cases.

Whilst one iBoss director focused on the ‘PII, SRA and funding requirements, the other iBoss director project managed the move to new office premises, IT software and hardware requirements, existing employee transfers, new staff recruitment and contractual requirements etc.

Consequently, once the PII, SRA approval and bank account where opened a successful completion of the ‘hive out’ was achieved very shortly afterwards. The practice was able now to ensure that no client was impacted by the agreement and a smooth transition was achieved to the delight of the both exiting Partner and the Law Firm.

This was an unusual project in so far as it required a number of component parts being put together but not necessarily in what would be regarded as the normal order. The focus was to make the opportunity work for the exiting Partner who was very excited about running his own business and he was very pleased with the outcome.

If you have a project whether straightforward or one that may require a more ‘out of the box’ approach, then the team at iBoss would be happy to have an initial discussion on a no fee/no obligation basis.

For more details of this project, contact Phil Jones on 07876 503830 or e-mail him at phil@theiboss.co.uk . For information on the full range of services that we offer visit our web site at www.theiboss.co.uk or give us a call on 0800 093 5240.

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