Pressure points mount for restoring decision making
Next week taxpayers will be focused on Philip Hammond, the Chancellor of the Exchequer, when he makes his annual statement of taxation, spending and borrowing in 2019-20. Northern Ireland approaches the Budget from a favourable starting point. We all pay income tax, VAT and national insurance at rates set by the Chancellor.
But, the relative advantage, or comparator, for every Northern Ireland resident, is that on like-for-like incomes, on average we are all enjoying about £1,000-a-year either in lower taxation (such as lower domestic rates) or benefiting from higher spending on public and social services than comparable average Great Britain households.
Starting from this advantage, the UK Budget prospects look less cheerful.
For the optimists, the starting point in testing the Budget arithmetic is the statement that we have reached the end of the period of austerity.
That could mean that the Chancellor now has extra freedom and spare cash so that Government spending might increase (in real terms) and the level of taxation might be eased
It may mean that there will be no further direct squeeze on social security benefits and the caps on public sector pay may be eased.
However, there is heavy pressure to find extra money for health services, the defence budget and supplementary funding to take some of the pain out of the introduction of universal credit (the new benefit to replace six other existing schemes).
The Chancellor is facing unavoidable extra commitments.
He must be prepared to increase the level of Government borrowing or to find new sources of revenue or something from both.
From a Northern Ireland perspective, the financial tensions will be obvious.
The Barnett formula will facilitate extra funds for the public sector budget and these funds will allow some allocation to areas where public spending is most squeezed.
Any increase in current spending is likely to fall far short of the spending ambitions for health, education, law and order, infrastructure services and housing. Locally, there are specific issues. The financial supplements from the Stormont House Agreement which delayed some of the changes to welfare reforms will be coming to an end.
Second, the supplementary finance agreed as part of the DUP and Conservative Government accord, the confidence-and-supply agreement, carries no guarantee of an extension or supplement.
It may be subject to review (or be phased out). Critically, some clarity is needed on whether (or when) the Stormont budget should be adjusted to allow for the introduction of an offset to the budget for any reduction in corporation taxation.
Officials are presumably still working on the agreed Executive policy for this change but this has not been converted into an operational timetable.
There is, pending Brexit, a serious doubt about the merits of the policy of lower Northern Ireland corporation tax.
The final shape of Brexit and the degree of regulatory alignment accepted by the UK, as well as the possible continuation of the same rules on State Aid (carried forward after Brexit), will cast a long shadow into 2019-20.
This becomes another pressure point for the restoration of full political local decision making.
Northern Ireland public service officials face 2019-20 with continuing budgetary shortfalls.
The prospect of higher taxation in the form of higher vehicle and fuel taxation, extending national insurance charges to older employees and the self-employed, accompanied by reductions in the tax incentives for pension savers, all make uncomfortable reading.
The possible approval of city deals for the Belfast area and Derry offers a new source of borrowing but borrowing that must pay its way. This could be a deceptive bonus. We must be careful what we “wish for”. Tourist trade representatives will hope that the Treasury will support lower VAT for tourist activities and the removal of air passenger duty.
Some concessions are possible.
Buying or selling a business can be a stressful and time-consuming process. These are some of the important legal steps to take to ensure that the process is as pain-free as possible. 1. Get the right advice You will need professional advice from a solicitor and an accountant experienced in corporate/commercial work. For example, there are a number of tax considerations when buying and selling a business and these vary depending on whether you are buying assets or shares. Your professional team’s advice will be invaluable when negotiating the deal breakers and drafting the Heads of Agreement. 2.Heads of Agreement The Heads of Agreement should be agreed at an early stage after acceptance of the offer. It is an important document which can safeguard against disputes later in the process. It can also include an exclusivity period, a promise that the parties will not negotiate with any other party and confidentiality provisions. 3.Research and valuation Make sure you get a thorough valuation and know the sector you intend to buy into. Do you need to survey the property? 4.Finance Investigate finance from the outset to ensure that you are aware of your parameters when negotiating. As a buyer you will need to provide your business plan and accounts for at least the last three years to the finance provider or investor. 5.Due diligence The buyer will need to verify the information provided about the business during negotiations to make sure the offer is accurate. There will be a period of legal, financial and commercial due diligence following acceptance of the offer when the buyer’s solicitor will provide a questionnaire raising queries and requesting documents, e.g. accounts, contracts, director loans, customer lists and orders, IT systems and data control, stock and finance among others. This exercise should give the buyer a clear picture of the business, how it is performing and any potential or ongoing issues. It is common during this exercise that some issues will arise that were not previously disclosed by the seller. The buyer’s solicitor should work to resolve these, if possible, and include any indemnities or warranties in the agreement to protect the buyer moving forward with the business e.g. ongoing litigation, or property issues. The financial due diligence should reassure the buyer there are no hidden liabilities. Commercial due diligence will inform the buyer of its regulatory framework and the seller’s marketplace. 6.The agreement The drafting and negotiation of the agreement for the sale and purchase of the business is extremely important. As a buyer you need to ensure the document includes the necessary warranties and the seller will want to limit any warranties. The seller knows that the buyer enters into the agreement on the basis of the statements/warranties given by the seller to the buyer about the business. The agreement should include remedies to the buyer of any breach of these warranties. A buyer’s solicitor should seek these to encourage active and comprehensive disclosure during due diligence as these may give rise to a price reduction and it also provides the buyer with a post completion remedy against the seller if any of the statements made or information provided is wrong. The agreement can pro- vide for any assignment of leases, novation of contracts and TUPE considerations for the employees.
The buyer will want to include indemnities.
An indemnity is a covenant/ promise by the seller to reimburse the buyer in respect of loss or damage arising from a particular cause, i.e. those risk areas identified during due diligence and can include potential or ongoing litigation, employee liabilities or missing documents of title for the property.