Fundraising made simple…..

Tinchy Stryder, who is apparently something big in the pop world these days and therefore a suitable role model, has been advising young people to invest and save wisely. I think this is a great initiative, and personally believe that lessons in business and finance should be compulsory in all schools from as early an age as possible (as apparently does Ed Balls). However, what particularly struck me when reading about this, is the fact that he partially financed his debut album by selling clothes.

In a world where everybody from pop stars to business people seem to be looking for somebody else to fund their dream, it is a timely reminder that the best way to generate cash to finance investment is to sell something at a profit and then make sure you collect the money that is due to you.

There are countless stories of entrepreneurs who have held down two or three jobs to raise the necessary funds to finance their dream and then have “bootstrapped” (i.e. used funds generated from their own business operations) their way to fame and fortune. The Beermat entrepreneur, Mike Southon, is a big fan of this approach, and it certainly saves the time and hassle of trying to find, and negotiate with, potential investors. Such an approach will require sound and disciplined financial management, but it does mean that you will have more control over your own destiny than if you allowed external involvement in your business.

I know this sounds glib, and yes of course some businesses do require significant development capital which can only be acquired through outside investors. However, I do think that some entrepreneurs spend too much time obsessing about how to raise money and lose sight of the fact that they ought to be thinking about how they should actually be making money.

Business is not meant to be easy, but it is simple, and perhaps business people of all ages could benefit from learning from Tinchy Stryder’s approach to financing their dreams.

Counting the Cost

I was recently at the inaugural screening of the film ‘Counting the Cost’ , a film written and produced by Duncan Wiggetts for DLA Piper . It portrays the actions of the non-executive directors as they cope with undetected fraudulent conduct of some members of the management team. It’s not a true story, but given that the film is so well written (and acted) it could easily be mistaken for real life. The film looks at the challenges around preventing and detecting fraud and the importance of effective controls.

An esteemed panel were invited to provide their feedback and comments to a mixed audience of some 100 Lawyers, Accountants and Non-execs. Introduced by Graham Durgan of the Non Executive Directors Association (NEDA) and moderated by Duncan Wiggets and Neil Gerrard from DLA Piper, the panel included the likes of Donald Brydon , Chairman of Smiths Group and Royal Mail and Robert Wardle, a former Director of the Serious Fraud Office.

The event provided a lively debate, particularly when the post mortem revealed charges of dishonesty, fraud, conspiracy to defraud, fraudulent trading and bribery against the CFO.

Non-executives today are expected to act with a high degree of independence and have the skills and capability to manage the interests of stakeholders and shareholders alike. This has recently been highlighted in the case of Torex Retail, where Edwin Dayan, former Chief Technology Officer and Christopher Ford, former Finance Director of subsidiary Xn Checkout Limited, were charged by the Serious Fraud Office with conspiracy to defraud, false accounting and misleading an auditor.

These are the challenges we face in an increasingly regulated market requiring greater privilege and disclosure.

Taxing Times.....

Nobody likes paying tax. There it is. A bald statement. Oh people will tell opinion pollsters that they would happily pay more tax to improve services that they value, but in reality anybody fighting an election based on a message that more tax is a good thing is not likely to be holding the keys to No.10 Downing Street any time soon.

Yet like it or not, and regardless of who wins the next election, we are all likely to end up paying a lot more tax. National Insurance is due to go up in April 2011. It is highly likely that VAT will increase. There is also talk that Capital Gains Tax (CGT) will have to go up as well due to the disparity between the new higher rates of tax and the current 18% level of CGT. This will no doubt fall disproportionately on entrepreneurs, and provoke an outcry similar to that which followed the curtailment of the 10% taper relief for business assets a couple of years ago.

The Tax Advice industry is currently in overdrive finding ways of mitigating the impact on their clients of the new 50% rate which is being introduced from April 2010. And yet the retrospective nature of a recent court case relating to the reclassification of a long time “non dom” has caused many advisors to wonder whether even giving solid advice based on how tax law is currently being applied will be of any use if the Revenue decides that its own interpretation at the time was wrong and seeks to go back and correct matters.

It would appear that even with frighteningly detailed tax legislation in place, court cases will turn on specific facts, and the current HMRC view of those facts, and there is no guarantee that this view will be consistent.

HMRC are effectively operating as if there is a general anti avoidance provision in place, having cleverly blurred the boundaries between legitimate and legal tax avoidance and illegal tax evasion. Not only are they challenging the more imaginative schemes that have been specifically devised to avoid tax, but they are also looking to attack what was hitherto regarded as sensible tax planning.

Added to all this is the argument that the Directors’ Duties under the Companies Act 2006 require them to minimise their tax liabilities where possible which will make taxation issues even more of a burden for company directors and owners to deal with.

The UK already has a horrendously complex tax code with pitfalls galore even for those who do their very best to comply. Throw in the impact of uncertainty generated by HMRC’s attacks on tax avoidance, which could then potentially be applied retrospectively, and you are setting the scene for an era in which the tax lawyers are likely to be the main winners.

Taxing times indeed……