Hello
We are re-featuring a share valuation case this week. It concerns the fall out of shareholders in Lush Cosmetics and it is a really useful case to talk over with clients.
Shareholders often go into business as friends and due to one thing or another end up in dispute. Due to the high costs of taking legal action most settle out of court. Not so in the case of the Lush Cosmetics dispute, as the cash at stake is quite high. The problem concerned a disagreement about what price the company should pay for a leaving minority shareholder's shares.
Should 'fair value' as described by the Articles be a discounted value to reflect the size of the leaver's shareholding or should the value be a pro-rata proportion of the value of the whole company? The court set about interpreting the Articles and came up with a solution: no discount was mentioned and so none applied.
This is not the first case to come up with such a solution. With hindsight the shareholders should have all gone into business together after agreeing what the Articles meant, especially when they included some bespoke provisions. Probably, in this case, they simply did not realise what they had. I always say 'Begin with the end in mind' (in a 'glass half empty frame of mind'), this means: work out what happens if you all have a bust up.
Lots more this week, and we have some really great new guides for you, with plenty of CPD from Entrepreneurs' Relief to Exit strategies.
If you have any tax queries please do try out our Virtual Tax Partner support portal at www.VtaxP.co.uk
Enjoy the guides and updates and the news is below.
Back soon
Nichola Ross Martin FCA Tax Director
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Quick news (freeview)
HMRC Childcare Service compensation
HMRC is offering parents compensation if they have been subjected to various technical difficulties in relation to its online Tax-free Childcare account.
HMRC: Employer bulletin August 2017
HMRC have published their Employer Bulletin for August 2017. We summarise the key content for you, with links to our detailed guidance on the topics covered.
Case Update (freeview)
Shareholder dispute over Articles and share valuation
In Cosmetic Warriors Limited & Lush Cosmetics Limited v Andrew Gerrie [2017] EWCA Civ 324v Andrew Gerrie [2017] EWCA Civ 324, the Court of appeal held that the Articles of Association created a statutory contract setting out how the shares had to be valued. As no provision was made for discounting a minority holding no discount should be applied.
Senior Accounting Officer: personal VAT penalty overturned
In Kreeson Thathiah v HMRC [2017] TC06043 the First Tier Tribunal (FTT) found that HMRC could not prove that the Senior Accounting Officer had failed to take reasonable steps to establish and maintain appropriate tax accounting arrangements.
Insolvent customer results in VAT loss
In J & B Hopkins Ltd v HMRC [2017] TC05874 a taxpayer could not avoid paying HMRC the VAT assessment merely because it could no longer charge the VAT to its insolvent customer.
End user cannot claim unlawful VAT from HMRC
In HMRC v Investment Trust Companies (in liquidation) [2017] UKSC 29 the Supreme Court concluded that where HMRC have erred in VAT law, only the business who paid HMRC erroneous VAT can claim it back.
Editor's Choice (subscribers)
Exit strategies: Index
UPDATE: this guide takes you over the different options available for making an exit from your business, be a trade sale to a third party, a management buy-out, a company purchase of own shares, or striking off or liquidation. It covers tax, deferred consideration, earn-outs and valuations.
How to Value a Company (for tax)
NEW: the valuation of unquoted companies.
Practical Tax Guides and Updates (subscribers)
Sole traders
Accounting: fixed expenses and/or cash basis
UPDATE: confused as to what interacts with what? Start here.
Accounts healthcheck: self employed
UPDATE: a checklist that goes over the key pitfalls and planning points when preparing accounts.
Companies
Designing share schemes and employment related securities
UPDATE: this guide takes you over the different types of share scheme that are suitable for SMEs with FAQs and worked case studies.
In business
Valuations (non-tax): Businesses
UPDATE: start here
Private Client
Giving your home to your children
NEW: helpful summary guide to the tax issues and potential pitfalls in giving away your home.
CGT reliefs: a disposal or a business or its assets
UPDATE: one of the most useful guides on our site: CPD at a glance, CGT reliefs with links to our detailed guides on Entrepreneurs' Relief, Hold-over relief etc.
When an inspector calls...
Penalties: Senior Accounting Officers
UPDATE: What does an SAO have to do? What must be reported to HMRC? What are the potential penalties for SAOs?
Disclosure opportunities
New digital disclosure service
VAT
Correcting VAT errors
NEW: Our new guide on correcting VAT errors. What are the time limits? Can you do it through the VAT return? Do you have to notify HMRC?
VAT reclaims and unjust enrichment
NEW: Under VAT law, a claim for repayment may be denied if HMRC believe that the claimant will be unjustly enriched.
CPD Webinars
Missed last time's update?
Nichola's SME Tax w-update to 18 August
Features:
- Trusts: tax return guides for 2016/17
- Foreign currency: how do you tax gains?
- Image rights: new guidance
- How to form a company
- VAT and cars
- Main residence nil rate band
- New share valuation cases
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