Cross Oak Inns plc - The Tax Shelter Report

The Manager has, until recently, been a dormant company.
A full summary of the Management Agreement is provided below in paragraph 8.1 of Part VII.
Dividends
Dividend income is taxable in the hands of Shareholders and it is, therefore, the Directors’ intention to
pursue capital growth in order to maximize tax free growth for EIS shareholders. Under EIS rules, any
capital gain on a sale of the Shares should be free of tax to qualifying investors who hold the Shares
for the Three Year Period and comply with the other EIS rules. Therefore, the Directors do not intend
to distribute dividends during the Three Year Period.
Financial strategy
The Board believes that through the use of efficient and commercially sensible gearing in addition to
the Offer proceeds, it should be possible to enhance the level of return to shareholders. It is intended
that the debt will not exceed 70 per cent of the gross asset value of the Company. Indicative terms for
borrowing facilities on the basis of full subscription have been agreed with Bank of Scotland.
Corporate Governance
Although the Combined Code on Corporate Governance does not apply to the Company, as it is not
listed, the Directors intend nonetheless to have regard to certain key aspects of the Code as a means
of reflecting best practice, while at the same time having regard to the Company’s size and resources,
as follows:
(i)
(ii)
(iii)
(iv)
At present the Company has four non-executive directors.
The roles of chairman and chief executive are split.
The Directors intend to hold board meetings regularly throughout the year. The Board will be
responsible for formulating, reviewing and approving strategy, budgets, acquisitions, capital
expenditure and senior personnel appointments. The Directors will be in regular contact with the
Manager to consider operational matters.
An audit committee consisting of Anthony Richmond-Watson and Robin Privett will meet at least
twice a year and will be responsible for ensuring that the financial performance, position and
prospects of the Company are properly monitored and reported on, and for meeting the auditors
and reviewing their reports relating to accounts and internal controls.
Return on Investment
The Directors believe that an investment in the Company offers an asset backed, and therefore more
secure, type of EIS investment in a market with attractive returns and the potential for capital growth.
EIS and VCT Qualifying Investment
Provisional clearance has been received from the Inland Revenue that the Company will qualify for the
taxation advantages offered under the Enterprise Investment Scheme, and that it is also a qualifying
investment for Venture Capital Trusts (VCTs). For example, an individual subscribing for 10,000 shares
at £1 per share would pay £10,000 for the shares. This gross cost would be reduced, for an investor
who obtained income tax relief under the Enterprise Investment Scheme, to a net cost of £8,000, after
EIS relief at 20%. Further information on the EIS tax reliefs available is given in Part VI of this
document.
Corporate Venturing Scheme
The Company has received provisional assurance from the Inland Revenue that it will qualify for the tax
advantages offered under the Corporate Venturing Scheme. Further details of these advantages are
set out in paragraph 7 to Part VI to this document.
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