Business recovery expert Portland has experienced a record 12 months of appointments, which has seen a 60% increase in the number of solvent liquidations (members voluntary liquidation) where all company creditors are settled and the remaining balance paid to shareholders. The 12 month period in 2020 saw Portland payout over £56 million to shareholders of over 80 companies including the collection of debts and refunds of £6m. The companies Portland assisted include local businesses and large national brands, covering a wide range of industries including a mobile app development company, a long-established printing firm, a global wind turbine business, a number of IT & management consultancies, and a hotel which sold its property and business assets.
A members’ voluntary liquidation is a cost-effective formal process for dealing with surplus funds once a company’s creditors have been paid. This typically happens after the company’s business has been sold, and results in shareholders receiving a return on their investment in a tax-efficient way, usually with the benefit of business asset disposal relief (formerly known as entrepreneurs’ relief).
Managing director of Portland Carl Faulds made the following comments when asked about the future of UK businesses and the upcoming Budget:
Are more profitable businesses voluntarily closing or selling up due to the unpredictability of future trading conditions, lockdown restrictions and potential tax benefits being pulled in this year’s Budget?
“Although we have paid out a record amount of money to shareholders, the other side of the coin is that over the last 12 months we have seen a lot of anxiety in the business world due to unprecedented events. In the UK, we really did experience the perfect storm in 2020. As well a global pandemic, the UK had to contend with the reality of a no-deal Brexit. These two factors, combined with the fact that it has been 11 years since the last economic downturn, and the cycle typically comes round every 8-10 years, has meant 2020 was the year a majority of businesses would like to forget. Businesses, even those that are profitable, have some very tough decisions to make in the coming months. They could hold off until the economy restarts, which means a return to regular trading and profitability, or they may not risk an uncertain, potentially volatile, future and decide to sell up or close and retire early. However, they will still have to consider the next Budget which will no doubt see the chancellor, Rishi Sunak, try to recoup some of the billions of pounds used to keep businesses afloat during the pandemic.”
Could tax benefits be less lucrative and what could be in store for UK businesses in 2021?
“We are still seeing an increasing number of companies struggle due to rising costs at a time of stagnant or falling sales. Whilst the government is continuing to support businesses during these difficult times, there is no bottomless pit of grants and loans to bail out businesses. We have seen business asset disposal relief replace entrepreneurs relief in April 2020, reducing the amount of relief that can be claimed. In addition, there has been ongoing discussion about the rate of capital gains tax (CGT) being aligned with income tax rates which would mean that businesses looking to close or directors looking to retire see a huge potential increase in the rate of tax applied on the proceeds of the sale of a business. This was widely hailed as excessively harsh to penalise entrepreneurs this way, with a tax increase on what may be a once-in-a-lifetime event, reducing the reward for sweating blood and tears to build and accumulate value within their business. This change was previously scrapped due to the pandemic, but the chancellor faces an even bigger challenge this year, as he tries to find ways to boost the battered economy and save jobs after lockdowns forced closures of thousands of businesses. The funds to restart the economy need to come from somewhere and it could be placed on the shoulders of businesses to foot the cost with fewer tax benefits and a bigger tax bill.”
“Traditional businesses such as retail, hospitality and manufacturing have been particularly hit by the global pandemic where they have seen their income, in some cases, drop to zero. They are also seeing employment costs increase as a result of wage rises and to meet increasing employer pension cost obligations. Add to this that the Governments’ coronavirus jobs retention scheme (CJRS) – known as furlough will come to an end in April, many directors have some very difficult decisions to make in the coming month regarding business viability.“
What should I do if I want to voluntarily liquidate my business?
“When asked to deal with large amounts of money on behalf of clients, we are delighted that accountants and our business partners trust us with their clients’ affairs and continue to see us as the local ‘go-to business recovery professionals’. We work hard to ensure that we maintain the trust in our services through consistently maintaining high professional standards over the last 20 years. We are able to provide a complete in-house help and advice service for businesses, both solvent and insolvent. We pride ourselves at Portland as being able to offer a tailored and dynamic service that ultimately achieves the best possible outcome for business owners, creditors and our business partners. Whether businesses and directors are looking for help and advice or have made a firm decision on the future of the company, our team of qualified and experienced business recovery experts can help.”