DAVID CRADDOCK

the UK, to listen to experts, whether scientists or economists, weigh the evidence, and exercise personal judgement both at the ballot box and in the management of their everyday lives.

Brexit is the latest manifestation of The Irish Question that is predicated upon failing to recognise one of the key principles of political science, namely, that an island as a whole is a natural self-contained political entity. This is the conundrum that has challenged, and at times baffled, Prime Ministers from Gladstone to Lloyd George, through to Margaret Thatcher, with the work of John Major and Tony Blair ultimately producing The Good Friday Agreement. The impact of Brexit on employee share schemes has yet to be seen, as the transitional period has delayed its true effect on the British economy. However, employee share schemes can enable companies to draw upon the innate flexibility of the subject to maintain the motivation of its workforce and the equilibrium of the business.

The Impact of Brexit on Employee Share Ownership in the UK

For profit-sharing schemes, if profits of UK companies are reduced, whether by Covid-19 or by Brexit, then the employee profit share pot available for distribution will be reduced. This will, of course, vary by sector, and maybe the trend towards the longer hours that employees were working in the period prior to the onset of Covid-19 will continue in certain sectors, and compensate, thereby ensuring that profits will not suffer. For saving-related share option schemes, employees may continue to save at the same levels, provided they keep their jobs. The accumulated cash saving is always the fall-back position if the share price fails to perform. Is this the time to see a resurgence of Sharesave? Maybe. For the Partnership Shares Module within the Share Incentive Plan, employees may not want to take the risk of a fall in the share price. Companies should consider majoring on the profit-sharing Free Shares Module, or, possibly ensuring that the Matching Shares Module is in place, if they wish to uphold the strength of the Partnership Shares Module. Variable reward could come back on to the agenda with a renewed vigour, possibly through a new profitrelated pay initiative, as a purposeful approach by the British Government to avoid unemployment. Variable reward schemes work best, according to the evidence, when they contain a meaningful element of reward through shares. There may be a move to personal performance conditions rather than reliance on corporate performance targets in circumstances where those targets cannot be met due to circumstances beyond the control of the employees but the commitment from the workforce at all levels is stronger than ever.

The conclusions for the subject must be: (1) for companies: to introduce employee share schemes that continue to offer significant motivational and financial advantages and (2) for the British Government: employee share schemes contribute to the efficiency of the market economy by facilitating a strong incentive-orientated workforce and honing the skills necessary for personal responsibility.

DAVID CRADDOCK

David Craddock Consultancy Services

David Craddock will be very pleased to discuss your employee share scheme initiative with you.

David’s contact details are as follows: T: 01782 519925 | M: 07831 572615 E-mail: d.craddock@dcconsultancyservices.com Visit: www.davidcraddock.com

David Craddock Consultancy Services

Specialist in Employee Share Ownership and Reward Management, Management Buyouts, Share Valuation and Investment Education

Sustainable investing muddle? Keep calm and try a doughnut

Claudia Quiroz is lead fund manager of Quilter Cheviot’s Climate Assets Fund.

For those of us who work in the sustainable investing space, it’s all too easy to forget just how jargonfilled and confusing it can be, even at the best of times. More and more people are interested in investing in companies that support a sustainable economy by delivering clean water, waste management services, rural connectivity to the electric grid, and other initiatives. As Investment Managers, it’s our role to help clients understand the various sustainable investing options in a manner which is clear and jargon-free.

Industry regulator are also recognising the importance of sustainability with new rules called the MIFID II suitability requirements coming into force in March 2021. Under these regulations all advisers will have to demonstrate that they have considered their clients’ attitudes to ESG (environment, social and governance) and sustainable investing as part of the advice process.

So how can investment managers and advisers frame and explain such a dynamic process to clients in a way that they can grasp quickly without tearing their hair out?

Well, here it would be wise to turn to the world of Development Economics and borrow an excellent idea from the British economist Kate Raworth – the doughnut model. Originally presented in her 2012 paper entitled A safe and just space for humanity, and later turned into the bestselling book, Doughnut Economics, the model is an approach to conceptualising the dual challenge of ensuring that nobody falls short of life’s essentials without over-shooting earth’s planetary boundaries.

The inner ring represents the social foundations and the vital needs of societies including food, water, health, social equity and so on. The outer ring represents the environmental ceiling, earth’s planetary boundaries. Each country, state and municipality can have its own doughnut, depending on how well they are fulfilling these dual goals. This framework provides policy makers with a challenge to target the sweet spot in between where humanity can thrive.

And policy makers are taking note. Raworth is now advising the authorities in Amsterdam on how they should rebuild the city’s economy post Covid-19 and we have seen the doughnut idea becoming more and more prominent, particularly amongst our European neighbours.

Source: Kate Raworth 2012

But not only is this a revolutionary way of understanding the problem of providing for the global population without harming the natural environment, it could provide an excellent way of conceptualising what sustainable investing is all about, and in particular what fund managers are trying to achieve when they build their sustainable portfolios.

As a conceptual tool, the model is great at explaining, in an accessible way, what the purpose of sustainable investing is and why it is so important. By presenting the global challenge of sustainable development in this way, the doughnut shows why an investment focus on companies offering solutions to the global challenges of delivering ‘more with less’ for a growing population with finite resources is absolutely necessary. At a practical level, too, rather than each country having its own doughnut, each company, and indeed each fund, can be classified with its own doughnut based on the impact it has on the society and the natural environment. The problem faced by fund managers becomes clear. They want to select companies that hit the sweet spot, or the “just and safe space” as Raworth calls is. Managers achieve this by ‘negative screening’ companies, avoiding those companies generating revenue from controversial sectors of the economy and pushing on the environmental ceiling, and ‘positive screening’ companies, selecting those that are contributing to meeting society’s needs.

From a portfolio perspective, the positive investment themes seen on the inner ring of the doughnut of energy, food, health, resource management and water should be at the heart of the stock selection process. To warrant inclusion in a sustainable fund, companies must offer solutions to these challenges by delivering ‘more with less’, without breaching the environmental ceiling, the outer ring of the doughnut.

Hopefully this doughnut model provides a neat way of framing the stock selection challenge and can be a tool for explaining what sustainable investment managers are trying to achieve and how they go about making an investment decision.

If you have any questions on our own ESG or sustainable approach to investing, please don’t hesitate to contact us.

For more information, contact Nigel Hibbert on 0151 243 2160 or go to QuilterCheviot.com to discover more.

Nigel Hibbert

SHE’S GOT YOUR SMILE. GIVE HER YOUR GOOD FORTUNE TOO.

For more than 240 years Quilter Cheviot has provided bespoke investment management to generations of clients. Our team in Liverpool provide the same award-winning service to our clients in the North West.

Find out more about investing with us by contacting Nigel Hibbert, Head of Liverpool o ce, on 0151 243 2160 or visit www.quiltercheviot.com.

PERFORMING FOR GENERATIONS

Investors should remember that the value of investments, and the income from them, can go down as well as up and that past performance is no guarantee of future returns. You may not recover what you invest. Quilter Cheviot Limited is registered in England with number 01923571, registered o ce at Senator House, 85 Queen Victoria Street, London, EC4V 4AB. Quilter Cheviot is a member of the London Stock Exchange and authorised and regulated by the UK Financial Conduct Authority.

The Sequicentenary continues....

Our very own Society’s 150th celebrations began last year, and we hope they made some mark, although of course there was great disappointment with many gloriously planned events being curtailed, and hopefully just delayed by Covid-19.

Jon Scopes, Deputy President.

Manchester Society of Chartered Accountants.

Our neighbours to the east have their 150th anniversary looming next month, and Jon Scopes, the current Deputy President of the Manchester Society of Chartered Accountants, and dare I utter in these times, the President Elect, is undertaking his research.

Being a fine aficionado of The Accountant, he has unearthed this extract from the October 1894 edition.

For those of you more familiar with Times New Roman or Calibri, here is a 21st century interpretation.

The President said his official duties were now at an end, but before quitting the chair he felt that they ought to pass a vote of thanks for the handsome reception given them by their brethren in Liverpool. (Cheers) Mr HarmoodBanner deserved their utmost thanks for the time he had given and the courtesy he had displayed. (Cheers.) Then thanks were also due to Mr Jackson, the Hon. Secretary, and to Mr James S Holt, one of the most genial and hardworking of men he had ever had the pleasure of knowing. (Applause) Their friend Mr Mounsey also had been constantly at their disposal, and had done very much to assist them in the duties they had had to discharge. He would therefore propose "That this Autumnal Meeting of the Members of the Institute of Chartered Accountants in England and Wales desires to place upon record its hearty thanks to the Liverpool Society of Chartered Accountants, to its President, Mr J S Harmood-Banner, to its Hon. Secretary, Mr Jackson, to Mr James S Holt and Mr W K Mounsey, Junr., the Hon. Secretaries of the Reception and Entertainment Committees, and to Mr Finney, the Chairmen of the Dinner Committee, for the cordial invitation given to it, and the admirable arrangements made for its convenience, comfort and entertainment." (Loud cheers.)

The Vice President seconded the resolution, and said he had had the privilege of attending all the Autumnal Meetings held since the granting of the Charter in 1880. He felt sure that the meeting they were now holding had been as successful, if not more so, than any of

"The President said his official duties were now at an end, but before quitting the chair he felt that they ought to pass a vote of thanks for the handsome reception given them by their brethren in Liverpool."

the gatherings they had hitherto held. As they grew in numbers the Autumnal Meetings must naturally increase in size, and the greater the responsibility and work thrown upon the local committees. The Liverpool Society had done its work in such a way that it would be difficult for another town to come up to it, and certainly impossible to excel it. (Applause.) The motion was put and carried by acclamation.

Mr Harmood-Banner, in replying, said he was almost overwhelmed by the manner in which the vote of thanks had been received. They had endeavoured to do their best, and he hoped they would forgive any shortcomings. They in Liverpool would remain wiser men for the visit, and he hoped that those who went away would also appreciate the papers that had been read. He hoped also that the public would value what had been said and done. (Applause.)

Mr T W Reed, F.C.A. (Liverpool), moved "That the best thanks of this meeting be given to Mr C Fitch Kemp for his able and courteous conduct in the chair." (Cheers.)

The resolution was seconded by Mr R S Blease, F.C.A. (Liverpool), and cordially received.

Helping people through difficult times

(From L-R) Faye Wheeler, Anne O'Byrne 'Councillor for Warbeck,' Mike Black, 'Big Help Project', Shaun, Rachael O'Byrne, Alan.

For just

£3.50 per week

Choose 10 Grocery Items

amounting to an approximate value of

£10 - £15

in groceries During the pandemic, we’ve been inspired by the members of the team who have gone above and beyond to those most in need in their communities. From taking part in raising money through physical challenges, to helping those who are shielding, it’s been great to see just how much passion our DSG colleagues have to help others through this difficult time.

Faye Wheeler is an excellent example of this. Faye has been on the tax team at DSG since April 2018 as she works toward her ACA CTA qualification. She has been using her time outside of work to volunteer with the Big Help Project, a local charity with a goal to “feed the hungry, overcome poverty, to free people from the burden of unmanageable personal debt, to help people into affordable housing, and to assist people on to a better future”.

Faye has spent the last 3 months assisting with the Big Help Project’s Community Food Partnerships (CFPs), which are volunteer-and staff-run community stores that offer their members food and other essential household items. For £3.50 each week, members can choose up to ten grocery items which amounts to an approximate value of around £10-15.

CFP’s will always give a FREE emergency food parcel on someone/ a family’s first visit, but then they are helped, supported and signposted to gain advice in a number of sectors that can help them. One being the Foodclub side, teaching them to keep just £3.50 a week to feed their family. This then leads to budgeting and debt advice, wellbeing, housing, welfare, etc, create a Community Hub based around the weekly family shop.

One key aspect of the CFPs, that in normal circumstances would be food clubs, members can stay for a cup of tea and a chat, and this sense of community is central to everything the Big Help Project does. However, with social distancing measures in place, this has not been possible, and the CFPs have been operating more like shops.

Prior to Covid-19 all volunteers came from firstly being a member of Foodclubs. This then leads to employment opportunities, which there have been several internally and externally. It gives people confidence and a feeling of wellbeing, thus the ability to change their life, if they wish to. No longer alienated or isolated, or feeling that there is no hope of change. It gives them options and opportunities they not may not have had before.

Volunteers like Faye have been instrumental in maintaining the community atmosphere and have taken to bringing supplies to those who are shielding and may not otherwise get face-to-face contact with other people. Whether it’s a chat through the window or a just dropping off food for the week, these volunteers are vital to keeping these organisations running.

Speaking on her experience of volunteering with the Big Help Project, Faye said:

Being part of such an important charity has been extremely rewarding. There is a real community atmosphere and I’ve met so many incredible people, both members of the CFPs and other volunteers and staff.

“I started volunteering with the Big Help Project around October 2019 and soon realised how much these places rely on the generosity of volunteers, particularly in what has been such a difficult time. Many people believe that you need a lot of spare time to make a difference, but all it takes is a few hours each week, and you can help so many people. I would encourage anyone with a few hours to spare to find your local foodbank – I’m sure they would love your help!” Faye was introduced to the Big Help Project by Mike Black, the founder of the New Destination Network CIC, which assists disadvantaged, disassociated, under-funded and alienated individuals, groups and organisations in Liverpool. Having been working with Faye for some time, Mike said: “Volunteers like Faye are what keep our organisation running. We rely on them for the day-to-day operations of our services and for fostering the community atmosphere that is central to everything we do. This pandemic has totally changed our ways of working, and we have had to quickly adapt by bringing the community out to those who

were shielding under these difficult circumstances. Without professional and hardworking people like Faye, this would not be possible to as large an extent.

“Unfortunately, this year has seen a sharp rise in the number of people relying on organisations such as our food clubs due to the COVID-19 pandemic. Our target for the year is to help 10,000 people and by June we had already surpassed that. Therefore, we would encourage anyone with a few spare hours a week to consider donating your time to a place like ours and make an enormous difference to our community.”

I’m sure you will all join me in thanking Faye for being a dedicated member of the DSG team, but most importantly for the work she is doing in her spare time when people need it most.

For more information on the Big Help Project, and to find

out how to get involved, visit: www.bighelpproject.com

(From L-R) Harry Doyle 'Councillor for Knotty Ash', Faye Wheeler and Mike Black, 'Big Help Project',

Top tips for managing in a crisis

Lindsey Cooper, Head of Restructuring Advisory at RSM in the North West, sets out a useful summary of current issues that will be of interest to business owners, company directors and their advisors.

1)The return of Crown Preference

From 1 December 2020, VAT, PAYE and employee NICs will rank as a second-tier preferential debt (behind employees). Employer NICs and Corporation tax are not preferential. This will mean that lender floating charge security is diluted by Crown arrears in any insolvencies after that date and therefore directors who have given personal guarantees to lenders will be more exposed as lenders seek to recover any shortfall by calling on these personal guarantees. As a result of this change, where lenders rely on floating charge security (e.g. stock, debtors) then they are likely to increase their provisions to take account of HMRC arrears which will reduce facilities available to their customers and lead to a general reduction in liquidity.

In future, lenders are also likely to require much greater visibility around the level of a customer’s HMRC debt. If a customer has substantial HMRC arrears, then a lender will gain some comfort if there is a formal Time to Pay (TTP) arrangement in existence. Lenders may require enhanced security to support facilities in the form of personal guarantees or cross company guarantees. In some cases, facilities may not be renewed and companies may need to consider alternative methods of finance e.g. invoice discounting.

2 )VAT deferred during the first lockdown

Businesses have the option to repay the VAT deferred during lockdown through an instalment plan such that the VAT liability is settled over 11 instalments (by March 2022), although HMRC state that businesses that are able to pay should pay by 31 March 2021. HMRC refer to the scheme as being “opt in” but are suggesting that anyone who deferred their VAT would be eligible to use it, so there do not appear to be any other eligibility criteria. The opt in will open early 2021.

For clarity this relates to the VAT quarter that was deferred (March/ June depending on stagger). Anything else outside of that not paid would be on a TTP and the subject of separate discussion with HMRC on payment terms.

Regarding TTP, we are seeing forbearance from HMRC and have seen arrangements of up to two years in our client base. However, as ever there is no consistent approach and it does depend on the specifics of the case and to an extent on which case officer you speak to at HMRC.

3) VAT Domestic Reverse Charge for construction industry

The Domestic Reverse Charge for the construction industry is to be introduced with effect from 1 March 2021 (having now been delayed twice).

This is a measure designed to reduce supply chain VAT fraud in the construction industry and it changes how VAT is handled for construction services in the UK. The customer receiving the services will have to pay the VAT due to HMRC under a reverse charge mechanism, instead of paying the supplier. This means the supplier will not have the cash flow advantage of receiving the VAT inclusive payment and paying over VAT at a later stage on its own VAT return. This brings considerations for both suppliers and customers in supply chains in the construction industry. Key considerations for businesses may include the cash flow impact throughout the supply chain and invoicing / system changes. If you think this will impact your cash flow adversely you should start discussions with your lenders so that a solution is in place before this change.

4) Job Retention Scheme penalties Whilst stressing that HMRC is not looking to penalise those who have made innocent errors, HMRC have published a fact sheet on the penalty regime which can be up to 100 per cent of the amount of the grant where the employer was not entitled to receive the grant and/or failed to notify an overclaimed grant. The naming and shaming provisions will apply to defaulters and directors of companies who knew about these overclaims and they can be made personally liable where the company becomes insolvent and the tax cannot be recovered from the company. Directors need to be aware of this and be taking steps now to audit