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www.scruttonbland.co.uk
Carving out a new chapter
Jewels of the East - Emily Mortimer Hendry talks about her stunning designs Land & Liabilities - things to consider when selling land for development A ‘Rosey’ summer ahead for Theatre in the Forest - Exclusive reader offer inside on p25
Beautiful gemstone jewellery that makes a statement
Info@emilymortimer.co.uk | www.emilymortimer.co.uk | +44 (0)7525451753
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Whowe are
OUR PARTNERS
Scrutton Bland is a leading provider of accountancy, independent financial advice and insurance brokers to both business and private clients. Our philosophy is to offer clear, professional advice and to find the most effective solution to meet the individual needs of each client. We have regional offices in Ipswich, Colchester and Diss but also work with clients throughout the UK. Our specialist commercial business teams provide accountancy, tax, audit, insurance and business advice to owner-managed companies through to corporate operations. Our Private Client Service is tailored to providing IFA advice, tax guidance and wealth management services to private individuals. We are committed to delivering great client service and constantly strive to exceed the expectations of our clients providing a proactive and supportive service. If you would like advice on any of your business or personal affairs please contact one of our professional advisers who will be delighted to hear from you. 820 The Crescent Colchester Business Park, Colchester Essex CO4 9YQ 01206 838 400 Fitzroy House, Crown Street Ipswich, Suffolk IP1 3LG 01473 267 000
Tim O’Connor Managing Partner
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WELCOME | S C R U T T O N B L A N D | S U M M E R 2 0 1 6 |
Elizabeth O’Hanlon Senior Marketing Executive
Erica Gilson Marketing & Business Development Director
Catherine Britton Marketing Communications Manager
Welcome to our new look Adviser Magazine. We are committed to continually improving our communications and hope that you will enjoy our fresh new design and the mix of business profiles, lifestyle articles and top tips that we have for you in our summer edition. I n this edition Adviser spoke to Phillip Ainsworth of the Suffolk Agricultural Association who gives us his view on some of the challenges facing the agricultural sector in the region and we profile farmer, James Foskett, looking at how investment in farming can pay dividends. Our cover story this season is the interesting account of traditional English firm Titchmarsh & Goodwin, who came close to the brink before pulling off a successful management buy out. Also in this magazine, we feature the theatre company Red Rose Chain’s ‘Theatre in the Forest’ sponsored by Scrutton Bland. Somewhat appropriately in the 400th year since Shakespeare’s death Red Rose will perform his last play, The Tempest . On pages 24 – 25 we look at what you should consider before choosing a charity or arts organisation to sponsor and announce a fantastic ticket offer for our readers. Finally we are delighted to feature up-and-coming jewellery designer Emily Mortimer Hendry whose beautiful designs are inspired by her childhood spent on her father’s farm in Suffolk (page 32). We have a jam-packed issue this summer and hope you will enjoy reading all of our stories and articles. We always welcome your feedback on our Scrutton Bland Adviser magazine, if you have any comments or suggestions for stories you would like to read about please let us know at marketing@scruttonbland.co.uk
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CONTENTS Who we are...............................................3 Building on our heritage.....................6 WherE there’s muck there’s brass. .........................................8 Inheritance Tax Planning: passing on your wealth.....................10 A Crystal Ball to Taxation?..............11 FROM PAIN TO GAIN: FARMFLO................12 Frankly they’re a model of business resilience........................14 Land and Liabilities...............................16 Delivering the Goods..........................18 10 TIPS FOR MANAGEMENT BUY OUT.....20 Get a grip with a SIPP...........................23 Red RosE Chain......................................25 Conference facilities on your doorstep. ..............................26 Protecting Your Flock: risk mitigation in the poultry sector .....................................................27 CARVING OUT A NEW CHAPTER..............28 JEWELS of the East...............................32 Christies Care: Success is in the family........................................................35 RECRUITING THE RIGHT STAFF................37 EACH: MAKING A DIFFERENCE.................39 A ROOM WITH A VIEW...............................42
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Building on our heritage
There is a palpable air of excitement at the headquarters of the Suffolk Agricultural Association (SAA) as the team plan for the main event in the region’s show calendar. But the SAA is about much more than the Suffolk Show. Adviser spoke to Phillip Ainsworth, the new SAA chief executive about the initiatives they are taking to promote and develop the region’s agricultural sector. Q. It’s well known that livestock farming is going through tough times – has this been reflected in entries for the Show this year? Q. We all remember a few years ago when the Show was cancelled because of the bad weather. What kind of planning can you to do to cope with this kind of thing? Q. You have previously talked about your determination to raise awareness of food and farming for young people. What plans do you have to develop this?
A: Our livestock and equine entries continue to thrive, you only have to visit the show to see this with people coming from all over the UK to show their livestock. Competing and winning at the Suffolk Show is a significant achievement; we also attract top quality judges. The quality of our livestock exhibits are an intrinsic part of the show and a reason why so many people from the farming community and the general public keep coming to the Show. This remains, and will always be, a very important area for us to support and develop.
A: We grow our education activities every year, for example, the School Farm and Country Fair is now in its 16th year. So far about 50,000 Key Stage 2 pupils from schools right across the county have attended the event at Trinity Park which enables them to see at first hand where their food comes from and how it is produced. It can also help them begin to understand what a dynamic sector food and farming is and that it could open up many career possibilities to them in the future. We also run a Potato Day, the Food and Farming Student Day and the Farming School of the Year competition. These initiatives are so important because they inspire young people to look at food and farming in a different way. Food and farming is intrinsically linked to the economy and heritage of Suffolk and it’s very important that we play our part in raising awareness of this amongst young people. We also run the Trinity Park Conference and Event Centre which is an excellent conference and event venue. It’s important that we get the message across that when people choose to hold their event with us they are not only booking a quality event experience but also supporting all the good work we do as a charity to inform about food and farming, especially the work we do with young people.
A: We have a very experienced team in place who are well placed to plan every aspect of the Show; the attention to detail and precision of our planning is very important. The Suffolk Show is a major public event so safety of visitors has to be our top priority. In 2012, it wasn’t a case of bad weather; it was a case of public safety due to exceptionally high winds so it was a unique set of circumstances which the public completely understood, as did all our exhibitors and sponsors. What has been especially pleasing is how subsequent years have been so successful. Planning for the next year’s Show begins the day after we finish this years event with a very thorough series of de-briefs where we examine every aspect of the Show and address any issues we need to consider for future years. We also survey our visitors to look at how we can develop the visitor experience for them.
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Q. Some people have commented farmers in this region have largely escaped the worst of the recession. Last year prices were down but the good weather improved yields. What do you think will happen this year? A: Agriculture, like many businesses, is affected by global influences linked to a number of different factors. What does strike me is the resilience of the farming community and their entrepreneurship to develop new business opportunities.
Q. Do you think there is a problem with not enough new blood coming in to farming? The current generation of farmers are retiring, and it could be said that there are not enough successors coming in to take their place. What is SAA doing to address this? A: Food and farming like any sector needs to attract young people to come into it. The industry needs enthusiastic, entrepreneurial and confident young people and yes, I think it is very much about inspiring young people whilst they are in education as this is when they are making their career choices, whether they have been brought up in a farming environment or not. The traditional image of agriculture has changed so much, you only have to visit the Show and see the wealth of high-technology on display to appreciate that. Our education activities are very well known and play an important part in inspiring young people to consider careers in the sector. We also work in partnership with others who are active in this field, for example Easton and Otley College; we have just partnered with them to launch the Suffolk Agricultural Apprentice of the Year Competition which will celebrate the achievements of young people pursuing a career in food and farming.
For more information on the Suffolk Agricultural Association see www.suffolkshow.co.uk Scrutton Bland have almost one hundred years of experience advising farmers, landowners and those working in rural industries regarding their insurance, accountancy, and taxation needs. If you would like to talk to us about your business contact us on 01473 267000 or 01206 838400 , or see our website www.scruttonbland.co.uk
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WherE there’s muck there’s brass Controlled expansion is the name of the game for any business wishing to improve productivity and there is no better example of this than Woodbridge farmer James Foskett . Adviser spoke to James about his recent investment in new buildings for storage, processing, workshop, chemicals, and new offices over the last year, investments which will create greater efficiencies and take his Suffolk based farm to the next level.
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A few of years ago it became apparent to James Foskett if he was going to keep up with his outgrown the existing buildings and staff welfare was becoming a primary concern as 15 tractor drivers and up to 30 staff were having to share limited facilities, some of them working up to 35 miles away from the farm. Although renting two satellite facilities helped with storage space and workshops, the distance between the main site and the overflow buildings meant that James could not control storage conditions as closely as was needed to ensure that he was getting the best from his harvested crops and he quickly recognised that to meet health and safety requirements he was going to have to expand his main site facilities. Completed in May 2016, the largest of these new units is a 1500 ton cold bulk onion store which proves invaluable twice a year, once with onion sets, then later in the year with maincrop onions. Investing in new building technology has allowed the site to become increasingly efficient in that the sheds can be used for different purposes at different times of year, for example the onion store can be used to dry cereals in a wet year. As with many farms, storage for crops like potatoes is a continual problem, but one which James has now helped solve by factoring a 1000 ton store into his new development, half of which is designed as cold box storage with blast chilling facilities, the other half has been designed as an accumulator store for seed potatoes. The former increases shelf life of the vegetable crops by taking the field heat out of the crop overnight before despatch to the customers, meaning potatoes harvested in the afternoon can be chilled down from 20°C to 3°C before leaving the yard. The latter part of the store with the accumulater system enables 500 tons of seed to be sealed in the store from November to April and have so many parts per million of ethanol released in to the atmosphere which makes the seed multisprout, fooling the seed into producing more tubers per hectare which is essential when growing valuable salad potatoes. Whilst this technology isn’t new (it’s been used for years to ripen green bananas as they are shipped from the Caribbean), the installation of new on-site facilities on his farm has allowed James to use the technology much more efficiently. The ‘store within a store’ creates a seal which prevents gasses being leaked when the doors are opened, as is the case within more traditional units. The development project has taken many months: there is no point, says James, in trying to cut corners. Whilst the contractors were on site for almost a year, the end results are impressive; not just the new farm buildings but the farm now benefits from new office facilities and even a dedicated meeting room which is necessary to create the right impression when meeting buyers from their main retail customers. It is not only his conventional enterprise that has reaped the rewards of his investment. James also has a sizeable organic component to the Deben Valley farm, and part of his development plan includes a building designed specifically as a packhouse for organic produce. This may sound straightforward enough, but with strict regulations surrounding organic produce production, the white-walled unit had to be properly ventilated and insulated to enable the business to pack food on site. He went even further with the addition of a canopy outside which enables his produce to be loaded in all weather conditions without unnecessary spoilage – providing increased efficiencies in the farm’s processes. James first began converting some land to organic chemical-free businesses growth that he was going to have to invest in the intensive vegetable business covering 2000 acres he farms in Suffolk. Volumes of production had
farming in 2007, a process that involved an entirely different crop management system to conventional farming. Currently there are three blocks of organic land including areas at Kirton, Martlesham and now the family Farm at Bromeswell is being converted. With a strict crop rotation system based on six or seven years between the same crops, James has to closely manage the cultivation of his potatoes, carrots, onions, sweetcorn, green beans, beetroot and butternut squash. Indeed, to meet organic standards at least 20% of the field acreage is in fertility building crops such as vetch and clover at any one time. And there is the small matter of hand weeding and hand harvesting, a process which requires a small army of up to 60 casual labourers who come to Suffolk each summer, many of whom return to the farm each year. Despite the recession in 2009 seeing the organic market almost collapse, and many producers going out of business, for James Foskett, maintaining an organic side to his farm has paid dividends. 2015 was his best organic year to date with 350,000 cobs of sweetcorn, 900,000 bunches of carrots and 120 tons of green beans, all handpicked and sent to supermarkets and veg box suppliers across the country. With the recent investment in the site, James is positive that his organic produce will continue to thrive to the extent he is now converting some of the family farm at Bromeswell to organic. As the main harvest on the Deben Valley farm remains potatoes, the introduction of the new storage facilities sees James anticipating an increased capacity for storing up to 4000 tons of potatoes and 5000 tons of green onions in cold store, thus improving cash flow which is not only music to James’ ears – but also those of his accountant. Another James, James Tucker , Business Advisory Partner at Scrutton Bland worked with James Foskett throughout the recent expansion and advises agricultural clients looking for the most efficient way to expand their businesses. “It is critical that farmers extract maximum value from their assets and understand exactly what the fixed cost base of their business is and what it is doing for them,” says James (Tucker). “Producers like James (Foskett) need to understand and react quickly to market forces, and it is my job, as a professional adviser to help them do that in the most effective way for the long term future of the business.” “I am thrilled to have had an input in helping James develop the farm, and I have no doubt that it is a business that will continue to go from strength to strength – it is a real good news story for the wider agricultural industry.” If you are thinking of expanding a business, no matter what your sector, it is important that you find a team of professional advisers who you can work with and who understand what it is that you are trying to achieve. This is something which James Foskett believes has helped in his recent project: “I really like working with proactive advisers” says James. “In my experience a good accountant doesn’t just ‘do the books’. Having worked with James Tucker, and previous Partners at the firm before him, I have become accustomed to being challenged and being asked by my accountant, ‘Have you tried this? Have you thought of that?’ Getting that outside view is imperative to helping anyone thinking of expanding their business like I did, to make the right decisions.” James Foskett Farms can be contacted at 01394 461130 www.jamesfoskettfarms.co.uk If you are thinking of expanding your business or looking for professional accounting advice James Tucker can be contacted at james.tucker@scruttonbland.co.uk or by calling our Ipswich office on 01473 267000 .
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As you progress through retirement is it not unusual to gradually become less active, particularly in your later years, and consequently to spend less. You may therefore move your focus from generating income to passing your wealth to your family as efficiently as possible. Inheritance Tax Planning passing on yourwealth Neil Hewitt Chartered & Certified Financial Planner at Scrutton Bland looks at some of the options for passing on your wealth.
I f your estate value on death exceeds £325,000 (£650,000 for a couple), the excess value will be liable to 40% Inheritance Tax (IHT) which can be a very significant reduction to the estate value passed to your beneficiaries. There will be an additional “Residential Nil Rate Band” introduced from 2017, initially at £100,000 increasing £175,000 by 2020. This will bring the total Nil Rate Band (NRB) up to £500,000 per individual (£1m per couple) but this will not apply to everyone. There are many ways in which this can be achieved, one of the simplest methods is to gift money or assets to those you wish to benefit. However, this is not as simple as it seems. Firstly, once gifted you no longer have access to that asset/cash or any income from it; you may not need the income at this point but you may need it in future years for say, care costs. Secondly, making a gift of an asset may incur a Capital Gains Tax (CGT) liability on you. Thirdly, even though you no longer have the asset you will need to survive for seven years from the date of the gift for its value to be excluded from your estate for IHT purposes. You can consider trust arrangements during your life, or via your wills. These can be a very effective way of passing capital and controlling how beneficiaries receive capital and in what order. However, they can also be complex and often do not avoid the IHT issues. You could instead consider a multitude of different IHT mitigation plans/investments each with varying degrees of access, control, income options and IHT effectiveness. These types of plans must be considered carefully to ensure that they suit your specific circumstances and needs. They could range from plans with no
access to the capital invested but ongoing income, to those with full access to capital. Investments with immediate reduction in IHT liability on part of the investment with the rest exempt after seven years to those that will be fully exempt after only two years - and the list of variations goes on. You may have an asset that you would like to shelter from IHT but to do so would mean suffering CGT on sale of that asset. There are investments that can defer/avoid CGT and gain IHT exemptions to meet this need. Such plans can also offer a variety of other tax benefits including Income Tax Relief, CGT benefits, loss relief and tax free incomes. The question is not really “is there a solution to my Inheritance Tax problem” but instead “which option(s) best suits my specific needs”. These solutions are highly specialised and it is important that you seek advice from a Chartered and/or Certified Financial Planner. If you would like to arrange an initial meeting, without obligation, please call on 01473 267000 or email neil.hewitt@scruttonbland.co.uk If you are interested in finding out about IHT planning, why not join us at our roadshows being held around Suffolk this year. Places are limited so please register with Karen Free on 01206 838400 or email karen.free@scruttonbland.co.uk Scrutton Bland Limited is authorised and regulated by The Financial Conduct Authority
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Jason Fayers Tax Partner at Scrutton Bland looks into the future to identify some of the most significant tax changes which you may want to prepare for. A Crystal Ball to Taxation? A whole raft of new tax changes came into effect following March’s Budget. However, a notable aspect of the current Government’s approach to taxation is its enthusiasm to announce changes well in advance, and in some cases years ahead of their actual implementation.
APRIL 2020 Corporation Tax Rates
Here is a snapshot of some of the key tax changes which are due to come into effect over the coming years April 2017 Inheritance Tax nil rate band for residential property For deaths on or after 6 April 2017, an additional inheritance tax free allowance will be available in relation to property which has been an individual’s main residence and that is left to a direct descendant. The additional inheritance tax free allowance will also be available where an individual downsizes or ceases to own a home after 7 July 2015. The additional allowance will initially be set at £100,000 and will rise to £175,000 per person by tax year 2020/2021. However, the allowance will be restricted by £1 for every £2 by which a deceased person’s estate exceeds £2 million. Restriction of loan interest relief for individual residential landlords Private landlords will be unable to deduct their full interest costs on borrowings in calculating the taxable profits of their property business. The changes will be phased in over a four year period but by 2020/2021, relief will be restricted to basic rate tax relief on the entire interest costs. The basic rate relief on interest will be given as a tax reduction in the individual’s tax calculation for the year rather than as a deduction against the business profits.
Automatic UK domicile Non UK domiciled individuals will automatically be treated as UK domiciled for all tax purposes after they have been UK resident for 15 out of the past 20 tax years. In addition, individuals with a UK domicile at birth who have lived abroad for a number of years and who under general law have acquired a domicile in another country will be treated as UK domiciled if they resume residence in the UK. Corporation Tax Rates The rate of corporation tax which companies pay on their profits will be reduced from 20% to 19% with effect from 6 April 2017. Reform of loss relief rules The way in which companies can use losses will be relaxed. Company losses arising on or after 1 April 2017 will be available to be carried forward to set against different types of income and/or against the profits of other group companies. At present, companies can only offset losses which are carried forward against income from the same trade. In addition, losses can only currently be offset against profits of other group companies arising in the same tax year. Business, self employed people and landlords who keep their records digitally and provide regular digital updates to HMRC will be able to adopt pay as you go tax payments. The mechanism for how taxpayers will provide regular digital updates to HMRC has yet to be decided. However, the proposed changes represent a move away from the current annual tax payment deadline of 31 January and towards a method of tax payments much more closely aligned to receipts. APRIL 2018 Payment of Tax
Jason Fayers is a Tax Partner at Scrutton Bland and specialises in all aspects of business and corporate taxation. jason.fayers@scruttonbland.co.uk call 01206 838 400 and building a relationship with him or her well in advance of any changes being implemented allows your adviser time to prepare and identify the right solution for your individual needs. The rate of corporation tax which companies pay on their profits will be reduced further to 17%. In addition to all of the above tax changes, there are a number of ongoing government consultations in place which may herald much more fundamental changes to the UK tax system. These include a review of the way in which small companies are taxed so that such companies are looked-through and tax is imposed directly on the individual shareholders. There is also the possibility of some revisions being made to the planned changes before they are implemented. However, the announcements do at least allow time for people to prepare for those changes and if necessary to re-structure their affairs. What should you do if you think any of these changes could affect you? Getting the right advice early is critical to finding the right solution for any aspect of tax planning, whilst this might sound like common sense, it is important that you work with a tax adviser who understands your tax affairs and what you are trying to achieve. Finding an adviser you can trust
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“I love farming, but I cannot say the same about the paperwork”, Kevin Nolan, ‘Farmer of the Year’ and ‘Tillage Farmer of the Year’ Ireland, 2014. “Paperwork for my farmmanagement, customers’ requirements and compliance records is essential. When I discovered Farmflo software I was simply delighted. I spent a while setting up all my farm enterprise details online at Farmflo before downloading the smartphone app for day to day record keeping. My administration headache time is down by 90% and my records are accurate and up to date, allowing me to concentrate on my core business of farming. I’d recommend Farmflo to every farmer serious about saving time and improving their farm record keeping.” FROM PAIN TO GAIN Farming compliance made easy
KEVIN NOLAN
Adviser spoke to Farmflo’s new CEO Dan O’Donoghue about their leading edge software developed specifically with farmers in mind. Adviser: Farmflo has been getting a fair bit of coverage lately, what exactly is it? Dan: Farmflo is an easy to set up and use, cloud based, paper-less software package specifically created to improve farm management, compliance and customer traceability records. Farmflo can provide farmers and those professionals who they work in partnership with, such as agronomists, with paperless connectivity to ensure better farm management along with accuracy in compliance and traceability. Adviser: You have joined the company at an exciting time, how is the business going? We have seen fantastic growth in interest from all segments and mixed enterprises. Our aim is to make Farmflo the software of choice for the Agricultural sector, indeed one of Ireland’s leading Farmers’ Co-ops have recently selected us to replace the market leader. Recently we were appointed by Boortmalt, one of the top five malting businesses globally by volume. We now supply the software for their Irish agronomist team and they use Farmflo as their data capture tool for all their malting barley contracted growers in Ireland. Boortmalt have recently announced plans to extend their Farmflo programme into other markets which is really fantastic news.
Adviser: New technology companies can sometimes seem more about tech than people, but you have a great story. Dan: Farmflo is a story about a family farm and two brothers on different paths. One brother, Gareth, farms with his father Jim, in County Donegal on the north western seaboard of Ireland. His brother Jason is a software engineer, living in Scotland. Whilst holidaying on the family farm, Jason noticed his brother Gareth was often very restricted in his freedom to enjoy family activities and timeout due to the pain of the paper based, administrative burden involved on the mixed enterprise farm. After a number of discussions, Gareth threw down the gauntlet of challenge to his brother to write him up some easy to use software that would take the paper headache out of his farm-life and also assist in managing the farm. Jason accepted this brotherly challenge with enthusiasm and out of his efforts Farmflo software has emerged, “by farmers for farmers”. Following a tough competition, Farmflo was recently selected to join the Microsoft Accelerator Programme for three years. Adviser: Technology is always advancing, how are you dealing with this? Dan: The product has continuously improved since that initial release and the ‘whole farm’ solution for mixed enterprise is now accompanied by a suite of software including farm advisor packages for agronomists and also an integration to the excellent Xero accountancy package which means that Farmflo users can prepare their farm accounts more efficiently and accurately than ever before.
Adviser: There is a saying ‘Where focus goes, energy flows’, what’s the feedback you are getting from your clients? Dan: We have been working closely with a farmer in Ireland called Kevin Nolan. Having won ‘Farmer of the Year and ‘Tillage Farmer of the Year’ in 2014, we’re fairly confident that if he likes our product then we are doing something right. Our strapline is ‘From Pain to Gain’ as we recognised that farmers were getting bogged down in paperwork so designed Farmflo to relieve some of the pain of paperwork and administration by providing a better way for recording use of inputs such as seeds, fertilisers, agrochemicals, animal medicines and A.I. We work closely with all our users to understand what is and isn’t working and use this to continually improve our software. Scrutton Bland have recently launched an SBLive Agricultural solution incorporating Farmflo. To find out more about Farmflo visit www.farmflo.com to learn more about how the SBLive / Farmflo package can help you make your farming business more efficient call 0333 234 7144 or email info@sblive.co.uk
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Powerful on PAIN, Gentle on your Pocket
FARMER PAIN: Paper-based receipt systems and farm accounts compiled annually, after the event, resulting in performance feedback delays.
PAIN RELIEF: Farmflo seamless integration with Xero accounts package. Immediate views of key financial performance of your business with detailed costs analysis and profit margin insights.
For details on how Farmflo can help your business, contact one of the SBLive team on 0333 234 7144
S B L I V E | S C R U T T O N B L A N D | 1 3 www.farmflo.com
Frankly they’re a model of business resilience
Q. Sixty years is pretty good going for a retailer. Can you identify some of the things that have helped you succeed where others have fallen by the wayside? A: We started small and have grown steadily over the years. My parents started the business in 1956, when my dad sold sewing machines door-to-door, which was hard going! Getting funding to start up a business was very hard back then. Initially, many machines were second-hand and my Dad dismantled the machines and my parents would physically take them into London to have them re-enamelled, dad carried four and mum carried two. The machines were brought back, re-assembled to be sold on. It helped that my dad was a trained engineer and my mum had worked for Singer’s sewing machines, so they really knew the machine technology inside out. Over the years we’ve seen that our customers have come to realise that our staff are experts in their field – in fact I’d say that for many of them the Franklins name is more important than the brand of machine that they are buying. They know that if we stock it, then it’s been thoroughly tested before going on sale. So attention to detail, and our professional standards have certainly helped us to build the brand.
Q. How has the business developed over the years?
Franklins needlecraft and sewing machine store on St Botolph’s Street in Colchester is celebrating sixty years in business this year. Adviser spoke to Trevor Franklin , company director, on weathering the ups and downs of retailing, and what they are doing to prepare for the future.
A: Franklins initially rented premises on Essex Street where the Salvation Army is now located. From there we moved to Crouch Street, then Head Street and finally St Botolph Street where we have been for over thirty years. The other shops have been added one by one, so it’s been a controlled expansion. Ipswich was the first, followed by Dovercourt, Chelmsford and Salisbury (which we bought from a dealer). We now have forty two staff working in five shops, three service departments and a warehouse. I started on the shop floor when I was seventeen and later took control of the accounts department, although I had been helping out since I was small. I didn’t ever consider doing anything else - it’s in the blood!
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Q. Franklins is very much a family affair – how have you made that work? A: Thankfully myself and my brother Laurence have a good working relationship, and our wives and several of our children have followed us into the business. We all have our strengths, and we try to make use of our different skills as we move the business forward. Q. How have you adapted to the challenges of 21st century retailing? A: Retailing is all about change – if you stand still you’ll be left behind! Jason, Nathan and George (the younger Franklin generation) are in charge of developing the digital side of the business, such as the website and social media. They have also secured a selling slot on the shopping channel Create & Craft which is a great way of selling to people who can’t necessarily visit our shops. We also have a business sales department which sells machines to schools, hospitals, industrial laundries and colleges such as St Martin’s School of Art, and theatres like the Mercury and the New Wolsey.
Q. What about the success of The Great British Sewing Bee? Have you seen an uptake in business from that? A: The morning after the first episode we had new customers coming in to buy sewing machines – so yes! – it’s really given home dressmaking a boost. For many viewers it was an inspiration as it was the first time they had seen how clothes are designed and created. Series three finalist Lieutenant Neil Stace gives public displays of his sewing at our Salisbury store in his spare time, and all the Franklins staff love to discuss the technical merits of machines that they use in each series. Q. You’ve been an insurance client of Scrutton Bland for many years – have you ever had any unusual or significant claims? A: We’re well looked after by Dan Bligh and his colleagues at Scrutton Bland. Touch wood we’ve never had a major disaster, but we know that they’re there to help and advise us with the most appropriate and best value policies on the market. Plus I race against Dan in the Colchester half marathon. He beat me this year so I’m determined to even the score in 2017!
Franklins is celebrating its 60th anniversary this year with a range of classes, events and special offers in stores and online. See their website www.franklinsgroup.com or their Facebook page for more information. If you own or manage a retail business it is important to ensure that you have the right policy in place to protect your business. If you carry specific or high value stock lines such as fashion, jewellery, IT, wine etc then you may need additional or specialist cover. Scrutton Bland acts as insurance broker for local, regional and national retail businesses, and can provide expert guidance and advice. Contact Dan Bligh on 01206 838400 or daniel.bligh@scruttonbland.co.uk
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Gavin Birchall , Tax Director talks to Adviser about some of the hot topics being discussed in our region regarding land development LAND AND LIABILITIES Q. What trends are you seeing currently in relation to
Q. Why do you think there is an increasing trend towards landowner collaborations? A: A greater area of land can sustain large scale developments which can produce greater financial returns for landowners and developers alike. There are also substantial housing needs which local councils have to formulate plans for, so large scale sites are attractive to local councils in helping them fulfil this need. There are also political pressures for local councils to create new garden cities which rely on large blocks of land being available for any such development scheme. Q. Why do you think is it such a topical issue in East Anglia? A: Colchester Borough Council are currently formulating their Local Plan for 2017 to 2032 which will set out their strategy and plans for fulfilling local housing demand. Consequently, there is a timing issue in play with landowners needing to manoeuvre themselves in a good position for their site to be allocated as part of the Local Plan. In terms of the rest of East Anglia, the devolution agreement between Norfolk, Suffolk and Cambridgeshire devolves key powers over development and infrastructure to a new regional authority which is tasked with the delivery of 69,000 new homes by 2021.
landowners selling land? A: Locally, we are seeing neighbouring landowners “pooling” their land and collaborating together to sell their land as a collective unit to property developers. In many cases, the collaboration of landowners will appoint a land promoter to promote the land through the planning process ready for onward sales of the land to developers. The landowners will usually enter into a Collaboration Agreement to set out the way in which they will co-operate together to achieve their objective and the way in which they split any sale proceeds. Q. Can you explain a bit more about what the Collaboration Agreement is? A: Under collaboration arrangements, landowners agree to split the proceeds amongst themselves based on the acreage of land or land value which they contribute towards the overall land pool. Where land is sold in tranches (rather than as a single whole), the owner whose land is sold last, still receives a percentage of the proceeds for the land which is sold initially.
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Q. What are the top tax issues which a landowner has to consider when entering into any collaboration agreement with other landowners? A1: The landowner may be regarded as triggering a disposal of their land for tax purposes which could result in a Capital Gains Tax and Stamp Duty Land Tax liability without any cash proceeds to pay the tax. A2: The owner of the land whose land is sold can face Capital Gains Tax on the entire amount of the sale proceeds even though part of the sale proceeds have to be split between the other collaborating landowners. A3: The landowners who receive a percentage of the sale proceeds from land which is not theirs could also pay Capital Gains Tax on what they receive, resulting in a double tax liability on the same sale proceeds. A4: Great care is required in ensuring that the landowners are not viewed as trading in partnership together which could result in an income tax liability for the landowners at a maximum tax rate of 45% of the sale proceeds instead of a top rate of Capital Gains Tax of 20%. A5: Ensuring recovery of VAT on costs incurred in connection with the promotion of the land for development so that it doesn’t eat into the proceeds received by the landowners. A6: Preserving existing Inheritance Tax reliefs such as Business Property Relief or Agricultural Property which may be available in respect of the land so that a significant Inheritance Tax liability does not result if one of the landowners dies during the collaboration process.
Q. How can these tax issues be tackled? A: An effective approach to tackle these tax issues relies on:- • a detailed review of the drafting of the Collaboration Arrangement before it is finalised; • putting in place the right mechanism and structure to ensure that the way in which the sale proceeds are split does not trigger double taxation or impose taxation on landowners before sale proceeds are realised. Amongst the structures which are often considered include pooling trusts, cross options, restrictive covenants and special purpose vehicles; and • making appropriate VAT registrations and elections. Needless to say, this is very much a specialist area of taxation requiring advisers with a knowledge of a range of property related taxes such as Inheritance Tax, Stamp Duty Land Tax, VAT and Capital Gains Tax and an acute awareness of the legal issues.
Gavin Birchall is a Tax Director at Scrutton Bland and has a specialism in property and land based tax issues. Gavin has over 14 years experience as a solicitor advising land owners and businesses on a range of tax issues particularly in relation to property transactions and business succession and is an active member of the Stamp Taxes Practitioners Group. If you are thinking of selling land for development, or would like advice on any land related tax issues, contact Gavin on 01206 838 400 .
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Delivering the Goods
I n recent years the industry has faced a barrage of new legislation and regulations, it has also had to face the challenge of its own somewhat negative public image, a point that James Mainwaring, Director of Kersey Freight agrees needs to be contested: “The public perception of our industry isn’t the best, yet we have been making huge advances in the cleanliness and efficiency of our vehicles, and our drivers are as professional as the machinery operators from any other sector. We pride ourselves on running some of the cleanest and tidiest vehicles on the road, all of which conform to the EU Euro VI efficiency and emissions criteria and we work hard to ensure they are maintained to the highest standards.” New technology is being introduced all the time to improve conditions for drivers, connecting them to the wider workforce and giving them the tools they need to drive safely and comfortably at all times. Kersey’s drivers are each allocated their own vehicle, and fully trained by a professional instructor from the manufacturer’s dealership. All drivers have to complete a CPC or Certificate of Professional Competence and most then work as ‘trampers’ which means working away all week, thus improving scheduling efficiencies as the lorries can be moved fully loaded on each leg of the journey, 24 hours a day and 7 days a week. It cannot have escaped anyone’s attention that the haulage industry has been facing huge challenges as a result of the situation at Channel ports, where hundreds of illegal immigrants attempt on a daily basis to break in to trailers in a bid to reach the UK. James admits this has tested their security procedures, and they now only send hard- sided box trailers that are securely sealed, locked and fitted with door sensors which alerts their base if anyone opens the door. Furthermore the drivers are instructed to park at least 100km from Calais, or else use one of two secure service areas. The situation reached crisis point last year when a series of wildcat strikes by French dockworkers compounded an already difficult situation, and local MP James Cartlidge spoke up on
The agricultural and manufacturing heritage of East Anglia is well known. Yet all of this would be nothing without a thriving transport and logistics industry, to get the items from the region’s manufacturers to consumers across the UK and beyond. Adviser spoke to Ipswich-based Kersey Freight about some of the issues surrounding road haulage today.
Kersey’s behalf in the House of Commons. Since then things have improved, although it remains a demanding problem with no quick fix in sight. Notwithstanding the problems on the Continent, Kersey Freight are seeing their UK business improve considerably as more manufacturers use outsourced logistics to store and deliver their produce. They now have 26 drivers and are looking to recruit more in the next few months as new contracts with supermarkets and a large furniture manufacturers come into play. And their 55,000 sq ft of warehousing space at Hadleigh and Sudbury means they are able to provide additional services to retailers bringing in goods from overseas. “For firms needing warehouse space in the UK renting your own 20,000 square feet of warehouse can be far more expensive and time consuming than taking space from a third party logistics firm”, says James. “By outsourcing storage you also reduce the risks on your capital which is a major consideration for any business.” Scrutton Bland has worked with Kersey Freight for a number of years. “ Sharon Gravener has given us invaluable advice on cash flow,” comments James. ”Each one of our trucks costs about £90,000 and a trailer is another £20,000 so that’s a big outlay which needs to be properly planned. Sharon can give us assistance on the day-to-day financial things plus she’s there to help with big projects like purchasing land, not to mention processes like filing our annual tax return. With her help we’re free to get on with running our business. There’s a lot to be positive about the seamless way in which goods are transported from Suffolk across the UK and around the world.” Scrutton Bland provides corporate advice to a range of businesses, including advising on changing opportunities and alerting clients to new legislation which could affect them. If you would like any corporate financial information or advice, please contact with Sharon Gravener sharon.gravener@scruttonbland.co.uk or tel 01473 267 000.
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Sharon Gravener, Corporate Partner at Scrutton Bland
01473 825 180 sales@kerseyfreight.com
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10TIPS for Management Buy Outs
Sue Gull , Corporate Partner at Scrutton Bland, recently led their team of advisers who, along with Birkett’s solicitors and NatWest bank helped local firm Titchmarsh & Goodwin in their management buy out (MBO) (see pages 28-30). It was a long and complicated process, and Sue explains here some of the key points to bear in mind if you are planning to set out on this route.
1 ‘Failing to plan is planning to fail’ To attract lenders you will need to be able to articulate your current position in the market, communicate your projections for the future and to illustrate how and why you believe you can achieve these. Market research and benchmarking your business against similar businesses in your sector or region is particularly useful as this will demonstrate the credibility of your forecasts. 2 The price is right Getting an independent valuation of the business at the outset is vital for both the buyers and the sellers before any MBO process can begin. MBOs do not always reach conclusion and you may have to work alongside the other party in the future. Avoiding major under or over valuations and agreeing a fair valuation will not only speed up the process if the MBO goes ahead, but will avoid any ill will or animosity should the bid fall through. 3 Growth Many MBOs are only made possible through private or bank lending and all investors want to see a return on their investment. This is where having a good accountant can pay dividends – quite literally. Lenders will expect to see well laid out growth plans and you need to be prepared to demonstrate how you will achieve this growth, how long it will take you and how you intend to use any capital raised to achieve this growth. 4 Take a look around you Lenders will often support teams rather than businesses. You need to ask yourself if you have the right people in place within the business - not only to continue business as usual, but also to make your plans for growth happen. You need to show that you have a collective vision and the resources in place to turn that vision into reality.
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