For richer, for poorer
Tradition has it that some things go up after Christmas: waistlines, gym memberships and the number of divorces.
Although the latter is true, in fact, BDO have a year-round flow of work to do on divorce cases around the country.
Ann Pomfret is a director in the Manchester Forensic team, and is frequently involved in matrimonial cases. But while her own specialism plays a major role in some cases, there's another that she feels everyone involved should be sure to bring on board. “Good tax advice is critical,” she says. “Whether a case is contentious or not, it makes absolute sense to ensure the settlement is as tax-efficient as possible.
“There's only so much money in the pot, and everything has to come out of it. In today's climate there's real pressure to use every advantage available to minimise unnecessary cost. For example, a number of things happen in the year of separation, taxwise. BDO tax specialists advise on areas like the 'no gain no loss' transfers for Capital Gains Tax that can take place in the tax year of separation. A tax specialist can arrive at a tax efficient settlement.”
Naturally, the Forensic Accounting team tends to get involved when the financial position is disputed and complicated. One spouse may own a business with assets tied up in it, and the court will need to know how much it's worth. “It's not so much with a view to selling the business,” Pomfret explains. “It's more a theoretical question which needs to be looked at alongside how much cash can be extracted without damaging the business. And this isn't straightforward either – as you might expect, one party will tend to want to minimise this as far as possible. It's funny how many urgent capital projects suddenly crop up… In this instance, we might explore ways to raise funds through borrowing and so on.”
Accountants tend not to take sides in such matters. “If we appear in court, we're usually appointed as a Single Joint Expert to address questions like these,” says Pomfret. “Effectively we're instructed by both parties, but have an overriding duty to the court. We don't favour or advise the parties, and are very careful to stay neutral. Having a single expert streamlines the process and reduces costs, to help maintain proportionality. It's important that the expert knows what they're doing, though: a specific section of the Family Procedure Rules relates to their role. At BDO we're well used to producing compliant reports.”
However, it's when divorce cases haven't reached court that BDO can often add the most value. “Collaborative law is an alternative method of dealing with divorce that's popular in certain parts of the country,” Pomfret states. “We can work as expert advisers in situations where both parties are keen to avoid the stress and antagonism often associated with a court case, so they decide to hold a series of meetings with a solicitor and any other advisers they need, such as an accountant, and agree a settlement face to face. When people aren't at each other's throats, these have a good rate of success. The process is also generally faster than going through the court system.”
In a formal sense, collaborative law involves signing up to an official process; but in the event of a falling-out, the solicitor must be changed. This can prove very costly, so Pomfret points out that “there's a halfway house available – you can still meet and start the discussion process, without committing yourself by signing up to anything.
“In both cases, BDO would mostly be involved to offer advice on tax, business valuation and extracting funds from the business.”
Pomfret offers a final word of advice for anyone who may need to get accountants involved in a divorce. “I would always recommend early instruction,” she says. “We know what information we need to obtain and we know what questions we need to ask to get it. The sooner we can make a start, the less chance there is of wasting time and money – which is in nobody's interest, whatever else is going on in the background.”
