The directors present the strategic report and financial statements for the year ended 31 December 2022.
The Ombudsman Service Limited is a not-for-distributable-profit company which provides independent dispute resolution nationally for the Energy and Communications sectors. The business also administers the Parking on Private Land Appeals (POPLA) service on behalf of the British Parking Association.
Between January and December 2022, we handled just over 206,000 initial queries from consumers enquiring about our service. Of those cases which came within our terms of reference, we investigated and resolved 88,375 cases. The number of energy cases we received increased by 24% in 2022, while communications cases decreased by 10% from the previous year.
In summary, energy case volumes have been driven by the cost of wholesale prices and the price cap caused by external market conditions. Cost of living, the consumer price index and government support schemes have all contributed to the rising volumes. The Ombudsman Service Limited has continued to maintain its service level requirements to assist consumers by recruiting more people to join our Operations teams and realising quality improvements from the implementation of a new operating model. These strategies incurred additional costs to enable us to support consumers in the best possible way.
The business invested in recruitment and training in H1 to enable increased output in H2 leading to stronger case through put and financial results. This framework is now enabling us to react to the on-going challenges of rising costs in all sectors quickly and efficiently and is part of our on-going commitment to building trust for the future.
Digital Network Responsibility Limited, a wholly owned subsidiary of The Ombudsman Service Limited launched in 2022 trading as the Internet Commission. It is a digital regulation venture to support and develop our IT and online safety. It is currently developing commercial options for the future as we continue to look at initiatives to drive quality, efficiencies, and trust in this marketplace.
In recognition of the on-going challenges faced by suppliers, we’ve liaised closely with Ofgem and Ofcom and agreed new ways of working to help suppliers bolster their own front-line operations and focus their resources on helping their consumers. We support both Ofgem’s and Ofcom’s continued work within their core regulatory functions, and building on this, aim to work with them make the retail markets fit for the future.
Within the energy sector we’ve had to consider the primary impacts in the market, including rising costs and preparing for issues around affordability and supporting government schemes around energy and heat networks.
As the market evolves, it’s imperative that we keep our remit up to date to deliver net zero; protect consumers, particularly those in vulnerable situations; and provide them with a safe, reliable source of energy. We’re also supporting Ofgem’s work with the Department for Energy Security and Net-Zero looking into EV energy flexibility and setting out a vision for EV smart charging. In order to build consumer trust and confidence in adopting new technologies and adjusting to future energy changes, we think it is important to lay the groundwork now.
Within the communications market we’ve worked with Ofcom on online safety, and we were pleased to agree a new working relationship with O2 and Virgin Media. Within the parking sector, we’ve improved case management through our Lumin Technology in preparation for a single appeals scheme.
The cost-of-living crisis has also been a testing time for our colleagues; we’ve worked hard to support our people throughout 2022, implementing several colleague engagement and wellbeing initiatives. The Board is pleased to report that The Ombudsman Service Limited has received formal accreditation as a ‘Great Place to Work’ based on its 2022 employee survey and has been included in the Top 50 of the UK’s Best Workplaces for large companies.
We continued to develop our operating model throughout 2022 as part of our continuous improvement initiative aimed at enhancing the consumer journey. This included establishing an internal training academy to support colleague development. The Board is pleased that the investment made in additional colleague training and development has been reflected in our improved customer satisfaction scores.
Throughout 2022, we continued to implement our strategic options for the future. The Board had approved three areas of strategic focus around Alternative Dispute Resolution (ADR) consolidation, diversification and broadening the energy remit. As the market moves from being commodity to service-based, and with technological developments such as electric vehicles, we believe there’s more need than ever for consumer protection to keep pace with these advances.
Despite the challenges of increased volumes, we’ve maintained momentum in our strategic planning as well as focusing on our people and supporting our customers throughout 2022.
Results
The Ombudsman Service Limited recorded a loss, after taxation, of £1,304,557 for the year. This was in line with the Board’s expectations of achieving a result that is between break-even and a deficit based on the additional challenges relating to volumes increases in the energy market. This led to additional costs to recruit and train colleagues to support the continuing rise in energy cases.
£204,000 of bad debt incurred was in 2022. £202,000 (99%) of this related to Together Energy Ltd and UK Energy Incubator Hub Ltd, which both went into administration in 2022. The business was able to absorb this bad debt for the third year running, and supporting the energy market with reducing operating costs where we could despite our loss position, the business had no need to mutualise these across the energy sector. The Directors continue to focus on cash collection and reducing aged debt to minimise this risk. The Ombudsman Service Limited has absorbed the impacts of supplier failure for the past 3 years totaling over £1m of written off debt as we continue to support the energy sector through these difficult periods.
The business has been able to maintain a level of reserves in line with the reserves policy set by the Board. The policy aims to cover a range of three to six months total costs to enable the business the to deal with sudden increases or decreases in case volumes, and to invest to sustain a quality service to all sectors.
Risk Management forms part of the Board’s system of governance, contributing to and protecting the performance of the business. The Ombudsman Service Limited recognises that risk management is an important tool and therefore has a robust framework in place to facilitate controlled risk-taking. This includes regular risk reviews by senior management, with the most significant corporate risks considered by the Audit and Risk Committee and Board as appropriate.
A key risk to the business is the variability in case volumes driven by factors which are outside its control, such the volume of cases in the energy market caused by pricing issues. This risk is mitigated by on-going forecasting and planning to ensure the business remains financially sound and can provide an effective service to all its stakeholders. Additional resource has been put in place to manage increased volumes and assist with maintaining key performance indicators.
Given the significant investment in implementation, the operational change risks will also be a continued focus for the Committee in the coming year.
Internal audit
The Board recognises the need for independent assurance as part of the third line of defence, ensuring that first line management controls and the second line Risk and Compliance functions are operating effectively.
To ensure a continued robust system of internal audit, an in-house internal auditor continues to provide
independent assurance to the Audit and Risk Committee. Reports provided to the Board include risk management, governance, and internal control processes across the business.
The Board, through the Audit and Risk Committee, have agreed a risk-based audit programme for 2023 and will continue to monitor assurance needs and identify areas for focused review during the year.
Our people
The Board recognises the need for independent assurance as part of the third line of defence, ensuring that first line management controls and the second line Risk and Compliance functions are operating effectively.
To ensure a continued robust system of internal audit, an in-house internal auditor continues to provide
independent assurance to the Audit and Risk Committee. Reports provided to the Board include risk management, governance, and internal control processes across the business.
The Board, through the Audit and Risk Committee, have agreed a risk-based audit programme for 2023 and will continue to monitor assurance needs and identify areas for focused review during the year.
Diversity, Inclusion & Additional Support
We continue to make progress towards ensuring our services are accessible to everyone whilst taking steps to our strategic goal of broadening our Reach will be critical as we move forward.
Our aim is to become a legitimate, trustworthy organisation through our Reach and Access work, all the time ensuring all our stakeholders are central to our plans. We work closely with the Board, SLT and across the organisation to deliver the necessary change.
We have made significant developments to help to build trust in 2022 by bolstering our Legitimacy team with three new colleagues each with responsibility for:
• Reach and Access;
• Wellbeing; and
• Community and Environment
To ensure our decisions are data-led, we have continued to gather consumer and colleague data to ensure we know the profiles of both groups. Due to delays in census 2021 data being released we have been unable to complete comparison against national profiles. This will be a priority in 2023. However, we have made improvements in our data gathering for consumers by ensuring our CMS systems enables timely data-gathering at the point of case submission.
Our Academy Team has delivered foundation Inclusion and Additional Support training to all colleagues as part of the Mindset and Operating Model changes. We have created an Intermediate Additional Support training package for all colleagues in operations to advance their learning and confidence. This package includes introducing Working Together principles, identification and classification of Additional Support needs, responding to consumer support requirements and personal wellbeing.
We continue to mark key events in our cultural calendar to celebrate and educate. In 2022, we marked International Women’s Day, Pride, Black History Month and International Men’s Day with colleague participation, speaker sessions, colleague content and community support initiatives.
We know how important our colleagues are to the work we do and their wellbeing is key to this. As such we support them to be their best at work and home. To help colleagues with life’s challenges we have created a suite of welfare provisions including legal, financial and circumstantial support.
The Board takes a close interest in ensuring that the business has the right talent in the right roles, regardless of background and The Ombudsman Service Limited continues to meet gender pay reporting requirements.
The Board takes its environmental responsibilities seriously and is committed to reducing the impact the business has on the environment.
We continue to work with a waste service company to enable us to ensure that none of our physical waste goes to landfill. 45% is recycled, 21% goes to be anaerobically digested to create energy (food waste) and 34% is processed at a waste to energy facility.
Through our ongoing relationship with energy and carbon consultants, Envantage, we’ve laid out our approach to establishing our Net Zero strategy and reduce our impact on the environment. In 2022, we completed extensive Green House Gas reporting which established that commuting and working from home are the main contributors to our emissions- 100% of which are Scope 3. This data gives us a solid baseline with which to build our commitments around moving forward.
Corporate social responsibility
The Board supports the community work the organisation undertakes. In 2022 we delivered a refreshed approach to make a difference in our local areas of Halton and Warrington and contribution to:
• Inclusion;
• Reducing Hardship;
• Environment; and
• Local School Kids
We welcomed 3 new local charities: ‘Camp Project Wales’, ‘Halton Women’s Centre’ and ‘Mersey Forest’. We started a new relationship with ‘The Cares Family’ to make a difference at a more regional level. We are delighted to continue our long-term relationship with ‘Warrington Foodbank’ who have been a charitable partner for several years. The work we have done with these charities had the following impact in 2022:
• we raised over £43,000 to our charities,
• volunteered 1,375 hours of colleague time,
• directly benefitted 657 older people and 286 children plus their families.
In December we welcomed 250 Reception and Year 1 children from seven local primary schools for a Christmas experience. The children had a great time meeting Santa Claus, receiving presents, snacks and enjoyed other festive activities. Our colleagues made the day memorable by donning fancy dress. We received some fantastic feedback from the schools clearly showing their gratitude for the event we put on. We’re already planning to repeat this experience in 2023.
We will be reviewing our community work in 2023 to deliver further impact locally and regionally, and to ensure we embed this work throughout our business structure.
Future developments
In the longer-term the Group’s strategic planning process has identified some new possibilities and strategic options for the future. Central to these will be the core values of the Group and the role the Ombudsman plays in society - and ensuring this remains relevant in an ever-changing world.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2022.
The results for the year are set out on page 13.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The Group's policy is to consult and discuss with employees, through unions, staff councils and at meetings, matters likely to affect employees' interests.
Information about matters of concern to employees is given through information bulletins and reports which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting the group's performance.
The auditor, MHA Moore and Smalley, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
We have audited the financial statements of The Ombudsman Service Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2021 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows, the company statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the parent company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The specific procedures for this engagement and the extent to which these are capable of detecting irregularities, including fraud, is detailed below.
Enquiries with management about any known or suspected instances of non-compliance with laws and regulations and fraud;
Challenging assumptions and judgements made by management in their significant accounting estimates, in particular in relation to provisions and future performance in light of the impact of Covid 19;
Auditing the risk of management override of controls, including through testing journal entries and other adjustments for appropriateness; and
Reviewing board minutes and resolutions
Because of the field in which the client operates, we identified the following areas as those most likely to have a material impact on the financial statements: Health and Safety; employment law, compliance with regulator KPI's and compliance with the UK Companies Act.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
As permitted by s408 Companies Act 2006, the company has not presented its own income and expenditure account and related notes. The company’s deficit for the year was £1,115,663 (2021 - £427,221 surplus).
The Ombudsman Service Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is 3300 Daresbury Park, Daresbury, Warrington, WA4 4HS.
The group consists of The Ombudsman Service Limited and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
The consolidated group financial statements consist of the financial statements of the parent company The Ombudsman Service Limited together with all entities controlled by the parent company (its subsidiaries).
All financial statements are made up to 31 December 2022. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
Entities in which the group holds an interest and which are jointly controlled by the group and one or more other venturers under a contractual arrangement are treated as joint ventures. Entities other than subsidiary undertakings or joint ventures, in which the group has a participating interest and over whose operating and financial policies the group exercises a significant influence, are treated as associates.
The financial statements have been prepared on the going concern basis of accounting.
The Directors continue to assess the impact of supplier failures on all aspects of the business and measures have been taken to ensure the Group remains financially sound, whilst also providing the most appropriate service to consumers and participating companies in the current circumstances.
Specifically, the Group has been able to support hybrid working and focus on the wellbeing of colleagues, together with ensuring the continued availability of the Group’s services to all stakeholders, with a particular focus on the more vulnerable consumers.
The Directors have reasonable expectation that the Group has adequate resources to continue to operational existence for the foreseeable future. This, the Directors continue to adopt the going concern basis of accounting in preparing the financial statements.
Turnover represents subscription and case fee income of the service and any costs recovered in setting up new ombudsman services.
Case fee income is recognised dependent on the progress of the case and the stage of completion at the period end.
Subscriptions are included in the financial statements as they become receivable or due.
Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the income and expenditure account.
Equity investments are measured at fair value through surplus or deficit.
In the parent company financial statements, investments in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in surplus or deficit, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease to the extent it reverses a previous upwards revaluation.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in surplus or deficit, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in surplus or deficit, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets, other than those held at fair value through surplus and deficit, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in surplus or deficit.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in surplus or deficit.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
There are no other financial liabilities held by the Group.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
The Ombudsman Service Limited is only liable to taxation on its investment activities. Deferred tax is porvided for on unrealised gains on the valuation of investments.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Rentals payable under operating leases, including any lease incentives received, are charged to surplus or deficit on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
Fixed assets are initially recorded at cost and depreciated over their useful economic life. See accounting policy 1.8.
Useful economic life is based on the anticipated time that the asset will be in use by the company. This is based on historic experience and asset replacement policies.
The dilapidations provision is based on an average cost per square metre for the property leased to provide an estimate of likely costs. This is based on historic experience of likely costs but the eventual cost may differ.
There is a detailed plan in place to switch contract providers in relation to the case management system. The current contract is an onerous contract and as this will not be fully utilised in the future periods, a provision has been created that is based on the cost of the subscription, the minimum users tied into the contract and the length of the contract.
The bad debt provision is based on an estimate of how much is ultimately recoverable from debtors.
The total turnover of the group for the year has been derived from its principal activity wholly undertaken in the UK.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 6 (2021 - 5).
The actual charge for the year can be reconciled to the expected (credit)/charge for the year based on the surplus or deficit and the standard rate of tax as follows:
Ombudsman Services Limited is liable to corporation tax on its investment income but is exempt from corporation tax on Alternative Dispute Resolution activities, which are not considered to be trading activities for the purposes of taxation.
The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.
Details of the company's subsidiaries at 31 December 2022 are as follows:
Accruals and deferred income due after more than one year relates to the receipt of a lease premium which is being spread over the life of the lease.
Finance lease payments represent rentals payable by the company or group for certain items of leasehold improvements. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. The average lease term is 3 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
The remuneration of key management personnel is as follows.
The remuneration of key management personnel is set by the Remuneration Committee and is benchmarked against remuneration of similar sized companies according to data provided by Towers Watson.
There is no overall controlling party of the company.
The Alternative Dispute Resolution (ADR) Services provided by The Ombudsman Service Limited have been treated as a non-trading activity and therefore not subject to corporation tax. This is on the basis that:-
There is a statutory duty on certain companies to give their customers access to appropriate ADR.
A statutory authority has given approval to The Ombudsman Service Limited to provide the ADR service
The Ombudsman Service Limited governance, independence and structure require approval by Oftel and Ofgem.
The Ombudsman Service charges for its services on the basis of covering costs.
HMRC has challenged the status of the activities for tax purposes and has raised additional tax assessments. HMRC have completed an review of their position and upheld the assessments. Independent advice has been obtained by Trust Alliance Group Limited in support of the original treatment of the income as not subject to tax. The case will now go to tribunal. If HMRC’s position were upheld, the liability to HMRC would be approximately £2.2million comprising tax of £1.6m and interest and penalties of £0.6m. As the assessments are disputed by the company, this potential liability has not been recognised in the financial statements.