Getting an expert accountant involved at an early stage during matrimonial financial remedy proceedings
In the majority of cases, Williamson & Croft, as expert forensic accountants, would be appointed by the Court as a Single Joint Expert to act independently of both parties to advise on specific points (generally, for example, on the value of a business, tax implications of sale, liquidity of the business and sustainable future income from the business). However, there can be substantial benefits to getting our experts involved to advise one or both parties earlier in the process.
In one recent case we were appointed by the solicitor representing one party in a divorce in order initially to review the Form E disclosures, but by getting involved at that early stage we were able to work with the solicitor and their client to ensure the best outcome for the client.
Our client was not involved in, and had little knowledge of, their spouse’s business interests but identified the matrimonial assets as a 100% share in a trading company, a portfolio of properties and the family home.
Review of Form E Disclosures
Our initial engagement was to review the Form E of the spouse and the supporting documents to assist in the preparation of the Form E questionnaire querying the details provided and requesting additional information.
Key issues which we noted from our work included:
- The company was valued at a very low net asset value when it was a trading business with substantial profits which were drawn from the company as dividend annually by the spouse;
- The matrimonial home was valued at a current market value with a valuation report but the rental portfolio was based on historic cost or valuations which were several years out of date;
- A review of the bank statements identified transactions with an investment manager which identified a personal share portfolio not included on the Form E; and
- We noted from the financial statements of the Company that there were substantial pension contributions paid to a pension scheme for the spouse each year, being a SSAS which had also been excluded from the Form E.
Following this we were engaged by our client to provide a Report valuing the spouse’s 100% interest in shares of the business.
We also recommended a chartered surveyor to value the properties and a chartered financial planner to value the pension scheme assets and to provide independent financial planning to the client to ensure that they received the best outcome in terms of the mix of income generating and liquid assets to meet their personal requirements.
We prepared a detailed report which was FPR compliant (i.e. consistent with family Court requirements) and which valued the company on the basis of a multiple of maintainable future profits which is the most appropriate basis for most profitable trades.
This resulted in a value for the business, which it was proposed that the spouse retain the shareholding in to ensure a clean break, that was ten-fold the original Form E valuation and which was supported by analysis of recent accounts and sector specific values.
We were also engaged to review the tax implications of transferring the assets and were able to advise on how to minimise the tax on the transfer of shares in the properties (including the matrimonial home) and the share portfolio by timing these to ensure that any tax reliefs were maximised and where possible transfers were completed within the tax year of the separation.
If we had been appointed later in the process the effectiveness of the planning would have been partially neutered, showing why it is vital that advice is sought as soon as practical.
Having identified and valued the matrimonial assets we were then, together with our trusted partners and the solicitors, able to identify the best outcome for the client in terms of a fair distribution of assets that provided them with a mix of cash, property and shares which would allow them to rebuild their life and have a sustainable level of income to support their lifestyle whilst minimising the tax impact.
However, we have also been able to assist other clients when we have been jointly appointed by both parties to ensure that they have a clear picture of the make up and valuation of the matrimonial assets and can work to split these in a fair way that provides all parties with a best possible outcome from what are inevitably difficult circumstances. If you’re in need of such support, please don’t hesitate to get in touch with us today.