Recent Forum: Nucleus IP
Our thanks to Ken Sewell, Head of Business Development at Nucleus IP (NIP) 12 March 2020. Ken has been with NIP for almost fifty of the c. 130 years that it has acted on behalf of its clients to provide national and international Trade Mark and Intellectual Property protection for their brands. NIP currently manages trade marks in more than 200 countries and works with major brands such as Lexus, Moet & Chandon, Mitsubishi, TUI and LK Bennet.
Alan Platt is Managing Director of the John Good Group of companies which was founded in Hull in 1833 and is still owned by the Good family today. He is also Chairman of one of the Group’s two core businesses, John Good Shipping, which specialises in 3PL logistics, Freight Forwarding, Warehousing, Port Agency, Air Freight and Distribution. The other business, Good Travel Management, provides travel management services in the Marine and Offshore sector. Headquartered in Hull, the Group employs over 300 people in locations throughout the UK and overseas.
He joined the Group in 1998, since when he has seen gross profit rise from around £2m pa to £17m on Sales of around £105m pa. (in 2019). Growth has been both organic, and through acquisition of companies in similar areas of trade and with similar values to those of the Group.
Alan is passionate about the company’s family history, ownership and values, and places great emphasis on culture and staff engagement, and creating a fun and inspiring environment for the Group’s employees. He told us that there are four pillars to the Group’s success.
· Values - that the company and all its employees actually live and breath.
· Investment in people - such that all employees are included in an incentive scheme, and have benefitted from increased holiday entitlement and enhanced sick pay. Costs of recruitment are high and staff retention fundamental and he has endeavoured to make the conditions attractive to younger employees who want flexibility in their hours and conditions.
· The Groups CSR policy - which is as important for current employees as it is for prospective employees who increasingly question it at interview.
The Mathew Good Foundation. In 2011 the Group decided that it had more to offer society than its core commercial activities and established a Foundation that would allow employees working within the Group, both the time and financial resources, to support charitable causes about which they were passionate. The Foundation took the name of Matthew Good a 6th generation family member, who tragically died whilst running for charity, that same year.
Paul Everitt is CEO of ADS Group Limited (ADS), and Farnborough International Limited (FIL) its wholly owned subsidiary. ADS is the independent not for profit trade organisation, owned by its members, which represents over 1,000 companies across the UK aerospace, defence, security and space industry. FIL’s principal activity is the running of the biennial Farnborough Air Show, one of the world's biggest (now unfortunately cancelled until 2022 due to the COVID-19 pandemic), and operates the newly opened Farnborough International Conference and Exhibition Centre. ADS also coordinates pavilions for UK companies exhibiting at international shows such as Paris, Singapore, and others. Its activities are primarily financed by its member’s subscriptions and the events that it undertakes for their benefit.
ADS maintains close dialogue with government seeking support of the following, which it sees as priorities to sustain UK global competitiveness:
Continuing to build a successful partnership between Government and Industry to drive an industrial strategy that attracts investment and supports growth
Helping to secure the best outcome from the UK decision to leave the EU, by establishing a close relationship with the EU that supports the UK’s integrated European industry and sustains its global competitiveness
Investing in long-term innovation
Making the UK a global space leader
Developing a Defence and Security Industrial Strategy to drive UK prosperity and enhance national security
Paul talked about one of the main challenges currently facing the industry. Decarbonisation. The United Nations’ International Civil Aviation Organization (ICAO) expects aviation emissions to roughly triple by 2050, at which time aircraft might account for 25% of the global carbon budget. The UK aviation industry has pledged to cut its net carbon emissions to zero by 2050 – despite still planning for 70% more flights over the period. While more than a third of the proposed net reduction will be achieved through offsetting, Paul outlined the following three point strategy to achieve the balance of the target
Improve fuel efficiency. Here there is a performance improvement opportunity of 1.5%- 2.5%.
Use of sustainable aviation fuels. While biofuels are already available, their scope is limited because significant areas of land are necessary to produce them, which displaces other crops. The development of synthetic “kerosene like” fuels is required, he said.
A step change in hybridisation technologies. Approx. one third of aviation emissions come from short haul flights (up to 1000 nm). Hybrid aircraft are suitable for short haul flights but the design, development, and certification of a new hybrid would need £10-£20 billion of investment, and Paul believes that state support is required to meet the industry targets.
Paul also touched on the dynamics of the aviation industry and the balance between civil and defence sectors. Growth is currently in the civil sector, but defence, though smaller has been steadier over time. He believes that companies with a balanced portfolio will be stronger over the long term.
Intelligence Forums member, Larry Ward, North West Conveyancing led a discussion on a topic of his own choosing - the Sunday Times Tax List 2020 ( the “List”).
Heading the List with £276m of tax paid (which includes Corporation Tax and Payroll taxes – in proportion to the taxpayer’s share of the business - Income tax, Capital Gains Tax and Dividend Tax) is Denise Coates & family. Other notable tax payers are Sir Stelios Haji-Ionnou (No. 12 with £56m paid), JK Rowling (No.19 with £46m paid) and Sir Philip Green ( No.24 with £44m paid).
The discussion ranged around issues of morality (both of the underlying business and individuals), albeit legal but deliberate tax avoidance, and corporate and entrepreneurial philanthropy.
To some, Coates is the country’s most impressive self-made woman - a visionary who 20 years ago spotted the potential of the internet to turn her family’s chain of betting shops into Bet365. To others, the company is making a fortune from the arguably exploitative business of gambling. But Denise Coates, herself, would seem to have the moral high ground regarding taxation and chooses to put her personal (£276m p.a.) salary through the payroll. And while other gambling companies have left the UK for Gibraltar (where corporation Tax is 10%), Bet365 remains in Stoke-on-Trent, creating valuable employment and economic activity in an area that really needs them. But are we comfortable to be the recipients of tax revenues from such a business? That is not a call that HMRC makes.
JK Rowling is equally transparent with her affairs, and rather than seeking to reduce her bill through tax planning she reportedly discloses royalties of £100m+ on her self-assessment form. Sir Stelios Haji-Ionnou (EasyJet) and Sir Philip Green (Arcadia group -Topshop, BHS inter alia) on the other hand, choose to live in Monaco, which may not be simply for the climate.
On a personal level, individuals make use of personal tax allowances, tax efficient ISA’s, and capital gains tax planning (if fortunate enough)? Do we expect them to seek to maximise the tax that they pay because we deem it immoral not to do so? We simply expect them to act in accordance with the law. Are we to judge that the financially mobile should not be entitled to live where they wish to, even if this results in a lower tax bill for them?
EasyJet and Arcadia provide not just the goods and services that we need, but also significant levels of employment for people across the UK and Europe, and these companies pay corporation taxes and payroll taxes too (Note: some of this is included in the proportion allocated to the individual taxpayer in the List). If we aggressively tax entrepreneurial and corporate success, we risk losing tax revenues and possibly employment to a lower tax jurisdiction.
Politicians promise to “go after tax avoiders”, and tax avoidance has become increasingly difficult in the UK. Companies and individuals (like Jimmy Carr and others - K2 tax avoidance scheme) who engage in aggressive tax avoidance planning are now caught by the General Anti-Abuse Rule (GAAR) contained within the Finance Act 2013. GAAR counteracts ‘tax advantages arising from tax arrangements that are abusive’. Where ‘one of the main purposes’ of a scheme is to obtain a tax advantage, the scheme is required to be disclosed to HMRC. If there is no defensible business purpose the scheme will likely be challenged, and closed.
There is an increasing focus on global companies such as Google which are often singled out as serial tax avoiders. With operations in numerous countries, multinationals do have the opportunity to arrange their businesses so that higher profits arise in more benign tax regimes. In 2018, for example, Google disclosed profits of around £200m and paid around £50m in UK corporation tax on estimated Revenues of ……..circa £5.7Bn! How so? It makes only a small profit in the UK because it pays large licencing fees to the US. That is simply what the law allows, but where in the world is the bedrock of Google’s intellectual value created? Silicon Valley. So is it unreasonable that Google operations in the rest of the world pay licencing fees to Google in the US? In the uncertainty of the aftermath following the referendum in 2016, which company committed £1bn of investment to London to create 3000 jobs? Google.
And what of the extraordinary levels of philanthropy of many entrepreneurs and business owners? The Bill and Melinda Gates’ Foundation has been endowed by them with almost $50Bn, and Michael Bloomberg through Bloomberg Philanthropies has donated US$9.5 billion to many charitable causes, and pledged that his entire US$60 billion of wealth will be dispersed in the future. Two of the primary goals of the Gates Foundation are to enhance healthcare and reduce extreme poverty, globally. Do we prefer that governments remove such surplus wealth through taxation and allocate the funds as they see fit or do would we rather such individuals do it themselves?
The rich, and global corporations are often hammered as tax avoiders, but pay millions towards the national finances, and provide goods services and employment to national economies. Their profits will ultimately be taxed, it’s simply a question of where. Individual jurisdictions should surely be entitled to set their own tax rates. Indeed some survive simply because of low rates. It is up to national governments to devise legislation that ensures that the “right amount of tax” (whatever that means) is paid by individuals, national and multinational corporations.