Pres­sure points mount for restor­ing de­ci­sion mak­ing

Belfast Telegraph - Business Telegraph - - News - with John Simp­son @bel­tel_busi­ness

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.

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