The ASB is now proposing not to widen the number of companies moving to full EU-adopted International Financial Reporting Standards (IFRS). The proposals will affect companies where concerns had been raised that a move to full IFRS standards would be too complex and potentially costly to adopt. These companies will now move to a revised Financial Reporting Standards (FRS)

While the changes may provide short-term cost savings for certain groups, there are fears that the proposals potentially move too far away from the principal of public accountability that underpinned the original proposals. In addition, when changes to EU-adopted IFRS and the IFRS for SMEs come in, it is questionable whether the new FRS will be able to sufficiently meet the needs for these previously publicly accountable companies.

According to Steven Brice, Partner, Financial Reporting Advisory team at Mazars, while cost remains a key concern for all businesses in the current economic climate, we should not lose sight of the opportunity to fully modernise and reform financial reporting in the UK and Ireland as the original proposals set out to do. Changes need to be based on solid foundations to ensure the longer-term financial reporting needs and benefits are in place.

“A higher level of accountability should be provided by businesses that obtain funds from a broad group of outside interests, and inevitably these types of businesses are likely to carry out more complex transactions that need the use of IFRS. The benefits that users will gain from IFRS financial statements are therefore considered to outweigh the costs for preparers,” says Brice.

The proposals are open for comment until 30 April 2012. Final proposals are expected by the end of the year and adoption expected on 1 January 2015.

Richard Stewart is heading up the business and explains that combining an employee benefit software solution with strong advisory capabilities will result in a powerful platform to service the growing needs of employers, who are looking to professionally manage employee benefit packages.

“The new service is uniquely positioned to help employers within the context of a challenging economic environment and the impending upheaval of pension reform," explains Stewart.

The Department of Work and Pensions (DWP) recently confirmed that it is delaying auto-enrolment dates for SMEs to give firms "additional breathing space to prepare for the reforms while operating in tough economic times.” Companies have been allotted the commencement date for auto-enrolling after July 2013 according to size, although the DWP confirms that all employers with an existing staging date of on or before 1 February 2012 remain unaffected.

Medium sized employers will be re-allocated staging dates between 1 April 2014 and 1 April 2015. Small employers will be allocated automatic enrolment dates between 1 June 2015 and 1 April 2017.

New start-ups (from 1 April 2012 and up to and including 30 September 2017) will have automatic enrolment dates between, and including, 1 May 2017 and 1 February 2018.

Any new employer setting up from 1st October 2017 onwards will be required to comply immediately if paying earnings which attract PAYE deductions in respect of any worker.

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The scheme is available to firms with a turnover below £50m and whose business is more reliant on bank finance. This new lending pledge is capped at £40 billion.

The scheme is open to new loans and overdrafts and will use the low interest rates that the government can borrow at to reduce the interest rates that small business borrow at. By way of example, HM Treasury says that a new business loan eligible for the scheme would see a reduction in loan interest rates. As an example, a business loan of £5,000,000 would save the borrower up to £50,000 in interest payments over the term of the loan.

The new scheme allows banks to raise up to £20 billion of funding guaranteed by the government, to lend directly to smaller businesses. Banks will be able to apply for government guarantees within a two-year window for a fee. They can use the guarantee to raise funds at a lower cost. In order to qualify for the guarantees, banks must demonstrate that they can pass the benefits of the guarantee through to cheaper loans. This new scheme draws upon the European Investment Bank’s (EIB) well-established ‘Loans for SMEs’ scheme as a model example.

A VIMBO allows owners to reduce holdings and realise capital, but keep a share in the business going forward. The facility can also be used as a structure to incentivise management.

Peter Terry, Corporate Finance Partner at Mazars, says he is seeing an increasing appetite for VIMBOs, which in the current climate are seen as a practical solution for vendors who want to cash in a stake in their business. “It’s a way that vendors can de-risk a holding in their business as well as keeping a share in the venture going forward,” he explains.

Terry is also seeing the vehicle used for a wider variety of deals. As well as vendors looking to cash in a percentage of their business, other key drivers include using a VIMBO as a way to incentivise second tier management.

Terry believes one of the reasons behind the increase in interest is that owners now have a better understanding of how the structure works. Not least because the lack of traditional financing for sales and acquisitions means both vendors and acquirers are now more open to alternative solutions. 

“It’s taken a while for business owners to understand this kind of financial engineering, but we are now seeing a willingness to look at more creative solutions on offer from vehicles such as VIMBOs,” says Terry.

For further information on VIMBOs please click here

The new procedure means that at the outset HMRC will write to a taxpayer informing them that they are suspected of serious tax fraud. The taxpayer will be offered the opportunity to enter into a contract to disclose that fraud within 60 days. In return, HMRC will agree not to criminally investigate and in so doing removes the risk of prosecution. The investigation will then be carried out using civil powers, with a view to a civil settlement for tax, interest and a financial penalty.

Those who choose not to make this commitment will face a full investigation by HMRC – in some cases, this will be a criminal investigation with a view to prosecution. Anyone who signs the contract, but does not go on to admit and disclose fraud, will also face the possibility of a criminal investigation.

Taxpayers who are not under investigation, but who want to admit to tax fraud, may fill out a form to voluntarily request that HMRC consider their suitability for a CDF contractual arrangement. Under the new procedure, HMRC still retains the discretion to decide which cases are dealt with civilly, and which are investigated with a view to criminal prosecution.

Launching the CDF, Exchequer Secretary to the Treasury, David Gauke, said, “This new facility is a valuable tool which will help HMRC in its fight against fraud. HMRC will set out clearly what is expected of taxpayers, and what will happen to fraudsters who choose not to disclose their crimes.”

The changes, announced in the Finance Act 2012, are designed to enhance the UK’s attractiveness as a base to international groups and reverse the trend of companies seeking a more tax efficient base overseas. The reforms will also target groups artificially diverting profits overseas

Rosemary Blundell, Director, National Tax, at Mazars warns that the new proposals are both detailed and complex. Groups are urged to review all foreign subsidiaries and joint venture companies to assess which companies may be excluded from the new rules and those which have profits most likely to be apportionable on a direct or indirect UK shareholder of the CFC.

Recently published proposals on the changes to CFC rules see a significant shift in approach with the introduction of a gateway test to ensure that groups and their foreign subsidiaries can more readily identify whether they fall within the scope of the rules.

There are separate gateway tests for finance and business profits, but the underlying theme is to identify profits realised overseas as a result of UK activity – referred to as significant people functions (SPFs). 

For business profits, these will be regarded as artificially diverted where there is a separation of key assets and risks from SPFs that is tax motivated and would not have taken place between independent enterprises.  “This approach is novel and it will remain to be seen how easy it is to apply in practice,” says Blundell.

There are a number of entity-based exemptions currently proposed which include where a CFC’s accounting profits are less than £500,000 and non-trading income is less than £50,000; and certain excluded territories where the headline rate of tax in the CFC’s territory of residence is greater than 75 per cent of the UK main corporation tax rate.

The draft legislation for the widely anticipated finance company partial exemption has yet to be released. “This promises an effective UK tax rate of only 5.75 per cent on offshore group finance company profits by 2014. We expect this will offer an opportunity for UK groups to reduce their global effective rate of tax,” explains Blundell.

The changes are expected to come into effect for companies' accounting periods that start after Royal Assent in July 2012.

For further details on the impact of the new rules please click here