Case Studies
Case Study - St Ives acquires Service Graphics.
St Ives plc has acquired the whole of the issued share capital of Service Graphics Limited for an initial consideration of £18 million.
Established in 1961 Service Graphics is the UK’s market leading independent large format graphics producer. It provides a wide range of large format digital print services and offers a fully comprehensive consultancy, manufacturing and installation service to the exhibition, retail, creative, live event and leisure sectors. Particular areas of expertise include the provision of all kinds of display products, modular and custom designed exhibition stands, full service retail solutions and giant media production.
The company has some 400 employees located in offices and production facilities in London, Bristol, Edenbridge, Edinburgh, Glasgow, Hayes (Middlesex), Nottingham, Salisbury, Skelmersdale and Wales giving it extensive UK geographic coverage. Following the acquisition it will continue to be managed by the existing management team as part of the Commercial Products Segment of St Ives under the leadership of Simon Ward.
In the financial year ended 31st December 2005, Service Graphics generated profit before interest, amortisation of goodwill and exceptional items of £1,768,210 on turnover of £36,075,061. At the date of acquisition, assets are expected to be approximately £9 million and it is being acquired on a debt free basis.
Commenting on the announcement, Simon Ward, the Chief Executive of Direct and Point of Sale activities at St Ives, said: “Service Graphics is focused on the delivery of exceptional service and represents a real catch in today’s digital market place. The acquisition significantly extends our digital capabilities and reinforces our strategy of developing further specialist print related services, increasingly through digital technology.”
Announcing the acquisition, Brian Edwards, Managing Director of St Ives, said: “This acquisition represents a further investment in our digital capabilities. Digital technology is at the forefront of our future strategy and we now offer the widest range of digital format printing and related services in the UK.”
Harwood Hutton acted as tax and accounting advisers to Service Graphics during the transaction. Richard Hutton, who led the team, commented: “This deal provides both parties with significant opportunities for growth.”
Mundays acted for Service Graphics during the deal.
Case Study - Deadline Despatch is delighted with the support received from Harwood Hutton.
Deadline Despatch has used Harwood Hutton as it’s accountants and tax advisers for over 20 years. Formed in Gerrards Cross in 1980, Deadline were among the first courier companies to identify the immediate transport requirements of the rapidly expanding Thames Valley Business Community.
The company now operates from 4 offices, handling local, nationwide and global deliveries. Last year the Inland Revenue conducted a P.A.Y.E. inspection of Deadline Despatch’s business. They concluded that Deadline Despatch were offering certain benefits to a group of employees and not to all employees, therefore Deadline Despatch should have treated these benefits as “benefits in kind”, and dealt with the tax consequences accordingly. The cost to Deadline Despatch was to be in excess of £20,000. Graham Corney, Partner at Harwood Hutton, reviewed the situation for Deadline Despatch. He spoke to the Inland Revenue on their behalf and was able to show that there were no unreported benefits in kind. All employees were able to receive these benefits – however, for various reasons some employees were not able to make use of them, although the benefits were available.
The Revenue acknowledged this, with the result that Deadline Despatch did not have to pay the additional tax and NIC charge in excess of £20,000. How can Harwood Hutton help? We have a team of specialists who advise on expense and benefit matters. We can assist by advising on the best range of benefits for your employees and manage the P11D process for you. Our experts also regularly negotiate P11D dispensations with the Revenue.
Case Study - Ensure you have the correct Inland Revenue classification code
Ian Smith came to Harwood Hutton for advice. He was working as a management consultant, focusing upon the document management, passenger transport and print industries. His company, Ian Smith Consultancy Ltd., had received a very large tax bill. Ian was surprised and concerned about this, and wanted to talk to someone for some guidance.
The Inland Revenue intended to tax Ian under IR35. Since April 2000, anyone who has been working via an intermediary, such as a company or partnership, is caught by Inland Revenue rules if they fail the 'Inland Revenue IR35 test'. The Inland Revenue test is constructed to determine if a contractor is (a) genuine contractor or (b) 'akin to employed'. If workers are a genuine contractor, i.e. passed IR35, they can continue to pay themselves a small salary and take the rest of their income in the form of dividends, which do not incur National Insurance Contributions. If they fail IR35 and are deemed 'akin to employed', (they appear more like an employee than a genuine consultant) they are treated as receiving a notional salary and will need to pay P.A.Y.E. an N.I.C. based on this.
The notional salary is equal to the company’s gross income from relevant engagements, less certain specified deductions (calculations are based on figures as at the last day of the tax year). The Inland Revenue had categorized Ian as being 'akin to employed', which gave rise to these higher charges. Graham Corney, Partner at Harwood Hutton, spent time understanding Ian’s business and considering his tax situation. Like Ian, Graham felt the categorisation by the Inland Revenue was incorrect. Graham decided to take on the case and dealt with the Inland Revenue on Ian’s behalf. Graham disputed a number of points with the Inland Revenue and highlighted the fact that Ian did not work for one client, but for several. Furthermore, Graham was able to show using various contract agreements that Ian was entirely independent from his client’s businesses. To supplement this Graham used existing case law. The result for Ian’s company was wonderful.
The Inland Revenue reviewed the situation again and decided Ian is a genuine independent contractor. Financially this meant a saving in the region of tens of thousands of pounds. This case shows how important it is to have the correct classification code with the Inland Revenue. The Inland Revenue had previously interviewed Ian. Graham pointed out that under present legislation the Inland Revenue cannot insist on the Proprietor/Director of a business being present when they wish to inspect the business records and cannot initially insist on carrying out the visit at the business premises. This can be carried out at the accountant’s premises and the accountant deal with the Inland Revenue queries. The Inland Revenue prepare for their visits and normally work to a script when asking questions. It is vitally important that the tax payer is prepared to deal with them or appoint his/her adviser who understands the implications of the questions before agreeing to any meeting.
Without the input of Harwood Hutton the savings would not have been made. Ian added ‘It is a great weight off my mind that Harwood Hutton has been able to deal with this matter for me. Like many small business owners, I feel that, with all the legislation around, and the complexity of the UK’s tax structure, the odds would be stacked against me and sooner or later I would inadvertently fall foul of the law. With Harwood Hutton’s support I know that won’t happen: their advice is excellent and much appreciated.’
Case study - April Ready To Meet Environmental Standards
Over the years Harwood Hutton have given advice to numerous clients to help them grow their businesses. Recent work has been no exception. Next month West London Composting, one of Harwood Hutton's clients, hope to obtain environmental approval for their composting plans with actual business starting by the summer. This will be the culmination of a lot of hard work. Richard Hutton, one of the Harwood Hutton partners, has been working closely with Martin Grundon to help turn concepts into action plans and achieve results. Martin spoke with Richard last year when he needed some extra support and guidance. Although Martin was very comfortable with his overall strategy he needed assistance on how to approach various financial aspects, including raising substantial funds, and this is where Harwood Hutton and HSBC came in.
The two organisations were responsible for structuring a deal for Martin that ensured he could go ahead with his plans. Meanwhile, Sess Sigre partner at solicitors Turbervilles was negotiating a contract for Martin with the Local Authorities in Hillingdon. Martin is now in the final stage of development of a composting site in Harefield, Middx. The site will be capable of handling up to 50,000 tonnes of "Green Waste and Category 2 Food Waste" a year. It will be a huge operation and one of the few large sites in the country with such advanced technology.
The planning had originally started back in the late 1990s when Martin came up with the idea of composting wood and green waste. At this time it was quite a radical concept and from there the plans have grown. He has had to work hard to comply with tight environmental standards, and is now close to obtaining permission to go ahead. Richard comments: " This has been a great project to work on. It is fantastic to be involved in something that is so environmentally sound. The actual site has come on leaps and bounds since I started work with Martin and I have no doubt that West London Composting will be a big success. " Richard further explained how there had been several times when the project could have foundered if we had not "made things happen." Martin extols: " Harwood Hutton have been instrumental in helping me work through my plans. They have been a major contributor to the project".
The result will be a state of the art composting site. Nothing on this scale with this modern approach currently exists in the area. There are sites similar to this run in Germany, but the site will bring some new approaches to composting in the UK. The use of modern machinery will be key and a clean environment will be maintained.
Case Study - Excellent Result Achieved For Harwood Hutton Client
This June Richard Sadler Limited was sold to Sage Publications Limited. The deal marked the culmination of several months of negotiation and hard work. An opportunity arose for Michael Sadler to consider selling the family run publication business. His father had set up the company in 1965. Michael had been unsure of the exact worth of the company so had asked the company accountants Harwood Hutton for advice.
Two of the Partners, Graham Corney and Peter Agius worked on the deal. Michael Sadler said: " I am delighted with the results achieved. Harwood Hutton had acted as our accountants for many years, and we had always been pleased with the professional service received. However, I hadn't realised how much more they could do for us. They are very familiar with the process of selling a business and ensured that the sale ran efficiently. " The production and sale of journals division fits well with the product line of Sage Publications, the new owners.
They too are happy with the results. Peter Agius, one of the Partners at accountants Harwood Hutton, explains: " It is more than just a matter of negotiation. A good understanding of the sale process is absolutely crucial. Both the seller and the buyer need to be 100% comfortable with the deal. There can be so many reasons why a sale can fall through, so I am pleased that things went so smoothly. "