Working flat out to hit deadline

Apr 9 2008 by Karen Dent, The Journal

DEALMAKERS in the North East are catching their breath after last week’s frenetic activity ahead of changes to the Capital Gain Tax regime.

Lawyers and accountants working on behalf of people buying and selling businesses reported a hectic few weeks as they worked flat out to complete deals before the end of the tax year.

Capital gains on most sales made before midnight on Saturday were taxed at the old flat rate of 10%, rather than paying CGT of 18% on gains of more than £1m. Deal professionals reported an expected lull this week but said activity has not totally tailed off.

Neville Bearpark, corporate finance partner with Newcastle-based accountants UNW, said: “Our experience was it didn’t bring deals to the table – these deals were ongoing and it just brought them to a point in time where they had to go through.

“People are now accepting the new regime for what it is and are just getting on with it. I think there will be a lull and then it will be pretty much business as usual.”

Tyneside accountant Tait Walker completed 13 deals between January 1 and April 6, with an average value of £2m. During the whole of the previous tax year, the firm advised on 28 deals, said corporate finance partner Steve Plaskitt.

“There are still transactions that are going on but there were a lot of people working very late nights on Thursday and Friday to make sure deals went through,” he said.

Clive Owen & Co accountants of Darlington completed six deals during March. Corporate finance partner Angus Allan said: “It was probably a doubling or a trebling of normal. We would probably do 15 to 20 in a year normally. It all came to a focus in March.”

He reported business as usual, rather than a sudden dropping away. That view was echoed by Chris Welch, commercial partner at Newcastle lawyers Sintons.

His firm worked on 18 transactions in the seven days from March 27.

“In a normal week, if we got through two or three, that would be a lot.

“There hasn’t been a fall away of transactions, it’s back to normal. There is obviously those transactions that wouldn’t have got over the line in time and there are those that weren’t that tax critical.

“The deadline just accelerated everybody’s expectations.”

Andrew Scaife of accountants KPMG’s corporate finance team in Newcastle said deals that would normally have been spread over the next two quarters had been pushed through during the first three months of the year.

He added: “In the medium term we may now be in a better period for selling a business as there is no tax barrel for an entrepreneur to be held over in negotiations.

“Without that unusual driver, those selling a business may well be in a stronger position to hold out for a higher price as the decision to sell should revert to being based on the right timing for the business as opposed to a decision to reduce the tax bill.”