GAAR Prompts RSM Tenon to Drop Specialist Tax Unit
RSM TENON will drop certain tax services due to the government's clampdown on tax avoidance.
In the interim management statement for 1 January to 16 May the struggling listed accountancy firm announced that it will cull service lines in its specialist tax division due to chancellor George Osborne's recently introduced general anti-avoidance rules (GAAR).
"Following the announcement of a general anti-avoidance rule in the recent UK government budget, we have decided not to offer further new products through our specialist tax service line," the report said.
"Whilst this will have limited impact on revenues in this financial year (as these had substantially been earned prior to the budget statement), we will not earn revenues in this service line going forward."
Transaction based activities remain slow and the level of business insolvencies in the market and that the firm has managed to pick-up continues to be below market expectations.
Chis Merry, RSM Tenon CEO, said both he and the market expects the industry to pick up in the latter half of the year.
RSM Tenon announced a cost reduction programme in February, which includes reducing headcount by about 10% which will save £14m a year and is estimated to cost about £6m. It hopes the fruits of its labour will be realised in the second quarter of the next financial year, but the costs will put a further squeeze on its banking faciltities until then.
The cost cutting exercise is due to be completed by June with the firm 75% into the £6m they expect to spend and 75% into reducing its overall headcount by about 300 said Merry.
He also confirmed there are no planned office closures but, as part of an ongoing exercise into streamlining the business the firm will look at consolidating offices as leases expire, if and when necessary.
The firm isn't too interested in closing offices, he said "clients like that we have local offices but a national presence", said Merry.
In February the firm announced agreed credit facilities with Lloyds of £88m until 31 October 2012.
Merry said: "We are making good progress in delivering the actions that we identified in our interim results announcement on 29 February 2012. We are, and continue to be, committed to our clients and our people. Our clients continue to receive the same high levels of service that they have always enjoyed."
The process to appoint new board members is under way, with chairman Adrian Martin, senior director and chairman of the audit committee Michael Findlay have stepped down. Merry said he didn't want to a put a date on when this was likely to happen, but that the intention is as soon as possible.
Donald Muir was drafted in by Tenon to manage its cost reduction programme.
Earlier this year the firm discovered irregularities in its books and uncovered a 9% drop in revenues to £107.8m. It also restated the prior year's pre-tax profit and reduced it by £12.1m.
Merry said he expects the firm to be here in 2013 claiming RSM Tenon has a good client base and a good quality business.
"We've had a few challenges, but i'm hoping we can put them behind us and move on," he said.