Financial Update Spring 2019 Newsletter

Printed on paper produced using wood fibre and manufactured at a mill that has been awarded the ISO14001 and EMAS certificates for environmental management. From the ashes: Government cracks down on phoenixing The government is proposing to introduce fines and disqualifications for directors who allow their companies to go bust to avoid debts. The changes come after several high-profile companies failed in 2018. One aim of the new rules is to stop ‘phoenixing’, the practice of dissolving a company to escape debts and liabilities – especially those to workers – before starting a new, often similar, business under a different name. To strengthen the insolvency framework, the government proposes measures to: ■ ■ Ensure greater accountability of directors in group companies when selling subsidiaries in distress. ■ ■ Enhance recovery powers of insolvency practitioners where arrangements are in place to extract value from a business in distress at the expense of its creditors. ■ ■ Give the Insolvency Service powers to investigate directors of dissolved companies who may have acted in breach of their legal obligations, in particular by phoenixing, for the purpose of avoiding debts. The proposals will also give directors of potentially viable distressed companies more time to set up a rescue by giving them a grace period when creditors cannot take action against the company. The company would then have time to prepare a restructuring or to seek new investment while continuing to trade, so that small suppliers and workers would still get paid. TRANSPARENCY IN THE BOARDROOM A consultation on corporate governance reform in 2017 led to measures to: improve transparency and accountability on executive pay; strengthen employee and stakeholder voices in the boardroom; and ensure more consistent corporate governance standards in large private companies. The government now intends to legislate to: ■ ■ Make group structures more transparent and require groups to provide explanations of their corporate and subsidiary structures. ■ ■ Strengthen shareholder stewardship, especially by institutional shareholders. ■ ■ Prevent companies paying dividends when in financial distress and ensure shareholders have an annual vote on dividends – something that some companies avoid at present by only paying interim dividends. ■ ■ Strengthen directors’ training and guidance. These are challenging times for businesses of all sizes, with the uncertainties over the outcome of the Brexit negotiations, rapidly moving technology and a highly competitive business environment. Good financial planning and monitoring of cash flow and results are essential if your business is to avoid distress, and be in a position to prosper and grow. We are here to help you structure your business in the most effective way and provide the financial information you need. 8 Winter 2018 Company Name Street name Town name City name AB1 2CD t: 01234 567 890 e: info@yourlogohere.co.uk w: www.yourlogohere.co.uk Partners Mr J Brown FCA Mrs F Spencer FCA Mr J Smith FCA Directors Mrs A Jones FCA Mr J Tall FCA Mrs N Stevens FCA Registered to carry out audit work in the UK and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales. BUSINESS @yourlogohere /yourlogohere /yourlogohere VAT Building in the reverse charge A new basis of accounting for VAT will be introduced for builders and contractors from 1 October 2019. The long lead in is to give smaller businesses affected time to prepare. The basic idea is that the main contractor will account for VAT on the services of sub-contractors under the reverse charge mechanism. At the same time, an input VAT deduction is given to create a zero-VAT position for the transaction. The reverse charge will apply through the supply chain until the customer receiving the supply is no longer a business supplying construction services. Sub-contractors will therefore no longer charge or account for VAT. The reverse charge will apply to a wide range of building services, although various professional services are excluded. The rules promise to be quite complex and VAT incorrectly charged after the introduction date will not be recoverable. iStock/VM SAMPLE