Further questions for UK Boards:

Following on from our brief article published on 12 September 2017, on “Questions for UK Boards”, we have the some further questions for UK Boards:


If the FRC maintain or assert that you have to act with Entrepreneurial Leadership, (see this Guidance-on-Risk-Management-Internal-Control-and-Related-Reporting document for the background or our first article) how do you reconcile this with your ‘General Duties of Directors’ as required under section 172 of the Companies Act 2006:

The Act states:

Section 172: Duty to promote the success of the company

 (1) A director of a company must act in the way he considers, in good faith, would

be most likely to promote the success of the company for the benefit of its

members as a whole, and in doing so have regard (amongst other matters) to—

(a) the likely consequences of any decision in the long term, [our emphasis]

(b) the interests of the company’s employees,

(c) the need to foster the company’s business relationships with suppliers,

customers and others,

(d) the impact of the company’s operations on the community and the


(e) the desirability of the company maintaining a reputation for high

standards of business conduct, and

(f) the need to act fairly as between members of the company.

Focusing specifically on sectiom 172(1))(a) (as highlighted above):

  • What factors or methodolgy do you consider as part of the ‘likely consequencesconsideration that you as Board member must apply in the decision-making process?
  • Do you apply or depaly some form of risk-based   assessment methodology?dice-tax

This is not a check box exercise, however, you need to reconcile the general duties with being entrepreneurial, within the context of the Companies Act and Corporate Governance principles, right?


Do you have a tool, methodology, process or mental model to apply in order to assess potential scenarios and outcomes?

In the next article in this series, we will draw on inspirartion from the Value-Based Management school of thought on applying a bit more science and rigour to decsion-making and balancing ‘duties of care’ with exploring your inner Entrepreneurial spirit.


©2017 Rohan Badenhorst

Here is the ultimate game plan for UK Corporation Tax

The Summer Budget 2015 contained quite a few surprise tax increases.

And the following post is our brief analysis of the ultimate game plan, as we currently see the landscape:


One of the interesting increases is the Dividend Tax Credit abolition and the introduction of a new flat rate £5,000 dividend exemption, then the graduated 7.5% (20% Tax Band), 32.5% (40% Tax Band) and 38.1% (Higher Rate Tax Band) from April 2016.
 Here is our take on the matter: (Health warning: This is our opinion and conjecture only)
This is part of a journey to hopefully redress the imbalance in corporate and personal finance towards debt, rather than risk capital (equity / share-based) finance.
At the moment interest on debt financing deployed in a business or to finance property and therefore rental income is fully deductible as it passes the Income Tax (Trading and Other Income) Act 2005 section 34 ‘Wholly and exclusively…’ rule.
This tax-break for interest, distorts financing activity in favour of debt (or leveraged) finance at the expense of risk capital (share capital) financing.
Getting Over Debt Overcome Financial Problem Crisis
In addition to this, dividends are viewed as passive income, however, to ensure there is no double taxation, a dividend tax credit (see this article) was  introduced back in 1973 as part of what is called an ‘imputation system’.  In summary what this meant was that the ‘pass-through’ of income already taxed in the company should not be double taxed in the investor’s hands.
We belief that the current UK government is aggressively pursuing a favourable Corporate Tax Environment (Tax Haven in common parlance) strategy and with this new mechanism in place, the reduction in corporation tax can be offset with the additional dividend income tax they will collect.  Once this system is embedded, the government will have the opportunity to reduce the tax shield (currently 20%) on interest expense deductibility, thereby giving it the opportunity to increase the dividend income exemption threshold to £10,000; £15,000; £20,000 or some other limit) and even further reduce the corporation tax threshold.  
This is called a ‘Tax Neutral’ effect, as it encourages a specific desired behavioural outcome, without increasing or foregoing the net tax collected from that specific area.
Therefore, our conclusion is to watch this space (as this is a longer-term strategy) and we will only be able to review this in a few years from now.
In the meantime, ensure that any tax planning you undertake is grounded in sound commercial reality and not purely as a tax mitigation exercise.
Definition of Tax Neutrality:

Tax that does not cause individuals or firms to shift their economic choices, such as to choose among different goods, inputs, locations, etc.

Read more: http://www.businessdictionary.com/definition/neutral-tax.html#ixzz3fyXCvicm