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strategy Scale up or sell out? As a business matures, an important decision arises: is it time to keep the status quo or invest time and energy in taking it to the next level? Charles Whelan, HW Corporate Finance explores how owners can identify when it’s time to bow out. Should you show your hand or ask the dealer for another card? At times, big decisions in business can feel like gambling. But, in reality, an owner should know exactly where their organisation is heading over the next five years. Will they retain a lifestyle venture, grow the business or facilitate a payout though a trade sale or an MBO or simply pass it on to the next generation? Whatever the plan, there should also be a focus on how an owner, whether fully engaged or viewing from the side lines, will be adding value to the business – or whether they are just getting in the way. Bringing in new blood As an owner’s relationship with their business matures, they may find themselves at a life stage where their children have left home, they are financially comfortable and their attention has strayed to other life passions. This, says Charles, is a potentially dangerous scenario, because there’s a risk that this decline in interest can be sensed throughout the company. Productivity dips can often follow. “Sometimes the owner may choose to replace themselves with an MD or CEO, but this also has its risks, as I often hear how a new MD is left feeling that they are hindered by a lack of autonomy or the owner is frustrated by not getting the hoped-for outcome,” he explains. “There should also be a focus on how an owner, whether fully engaged or viewing from the side lines, will be adding value to the business.” Charles Whelan, HW Corporate Finance But a new leader and full sale is often not what is needed or desired and an owner may instead develop a strong team to take the business forward. A partial MBO can work well for an owner looking to extract the value of the business while also leaving a good incentive for the management team to scale the business to the next level. Still in the game If an owner still has a passion for business, they may look to push the business forward – whether this is into new markets or by developing new products and services. “In my experience, the decision to scale up or sell up should be based on the owner’s energy, enthusiasm and commitment,”Charles concludes. 12 magazine | Issue 47 | hwca.com
opinion VAT: a more flexible future? A Europe-wide VAT regime should have meant a harmonised, integrated VAT system. But this didn’t prove to be the case, says Haines Watts’ Steve McCrindle. So what next for an independent UK? The single market failed to bring the promised consistent VAT regime across all 28 member states of the European Union, with significant differences to be found, for example, in VAT rates across the EU. Malta has a standard rate of just 18%, for instance, while Hungary’s is significantly more at 27%. But, says Steve McCrindle, a post-Brexit economy may actually bring a tax landscape based on simpler policies driven by a domestic agenda. “Of course, Article 50 hasn’t been activated yet, so our departure from the EU is not yet a reality,” he says. “But I have noted a sense of shock over the Channel, so once the UK begins to negotiate its Brexit, we may find we don’t get everything we ask for, including on tax.” Easing the burden If the UK becomes completely independent of the EU, it will have more control over tax matters. “The government would want to create a fiscal platform to enable businesses to trade, at least on a level playing field, but perhaps at an advantage to get the economy running again,” notes Steve. So, what measures could be put in place to help SMEs stay competitive post-Brexit? According to Steve, one area could be raising the VAT threshold from £83,000 up to £250,000 to help ease the tax burden on small businesses. We could also see an easing of importing and exporting red tape, such as the removal of EC Sales Lists and Intrastat regulations. “We could also see the scrapping of EU invoicing requirements and extension of the VAT cash accounting scheme to help make doing business that little bit easier for SMEs in the UK,” states Steve. Taking care of taxes Certain indirect taxes, says Steve, such as air passenger duty, landfill tax, climate change levy and insurance premium tax, are domestic taxes, so should not be unduly affected by Brexit. Customs duty, on the other hand, is almost entirely governed by EU legislation and so will likely be the biggest area to be affected by Brexit. “The political arena will dictate to a great extent what happens, and most of my clients are carrying on with business as usual as there is currently no way to know how the VAT landscape will shift in a post-Brexit world,” he concludes. “I have noted a sense of shock over the Channel, so once the UK begins to negotiate its Brexit, we may find we don’t get everything we ask for, including on tax.” Backing your business 13
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Page 15 and 16: panel The personal cost What sacrif
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