The Directors present their Strategic report, Directors' report and financial statements of the Company for the year ended
31 December 2021.
Capita Customer Solutions (UK) Limited (the 'Company') is a wholly owned subsidiary (indirectly held) of Capita plc and operates within the Group's Capita Experience division. Capita plc along with its subsidiaries is hereafter referred to as 'the Group'.
As shown in the Company's income statement on page 9, the Company reports a profit before tax of £198,069 in 2021 (profit before tax of £220,495 in 2020). The business performed satisfactorily during the year. Revenue and profits were consistent with 20 20.
The balance sheet on page 10 of the financial statements shows the Company's financial position at the year end. The Company has net assets of £677,373 in 2021 (2020: £513,489). Details of amounts owed by/to its parent Company and fellow subsidiary undertakings are shown in note 8 and 10 to the financial statements.
Key performance indicators used by Capita plc are operating margins, free cash flow, capital expenditure and return on capital employed. The Group manages its operations on a divisional basis consequently, some of these indicators are monitored only at a divisional level. The performance of the Capita Experience division of Capita plc is discussed in the Group's annual report which does not form part of this report.
The Company is subject to various risks and uncertainties during the ordinary course of its business, many of which result from factors outside of its control. The Company’s risk management framework provides reasonable (but not absolute) assurance that significant risks are identified and addressed. An active risk management process identifies, assesses, mitigates and reports on strategic, financial, operational and compliance risk.
The principal themes of risk for the Company are:
Strategic : changes in economic and market conditions such as contract pricing and competition.
Financial : failures in internal systems of control and lack of corporate stability.
Operational : including recruitment and retention of staff, maintenance of reputation and strong supplier and customer relationships, operational IT risk, and failures in information security controls .
Compliance : non-compliance with laws and regulations. The Company must comply with a range of requirements that govern and regulate its business.
To mitigate the effect of these risks and uncertainties including the continued effect of COVID-19, the Company has adopted a number of systems and procedures, including:
Regularly reviewing trading conditions to be able to respond quickly to changes in market conditions.
Applying procedures and controls to manage compliance, financial and operational risks, including adhering to an internal control framework.
The Company is reliant on the continued operation of its sole customer contract, which is subject to annual renewal in April , 2023 . The uncertainty associated with the renewal of the contract is an on-going operational risk for the Company. Refer to note 1.1 for consideration of this in the context of going concern .
Capita plc has also implemented appropriate controls and risk governance techniques across all of its businesses. These are discussed in the Capita plc’s 2021 annual report which does not form part of this report.
On behalf of the Board
The Directors present their Directors' r eport and f inancial statements for the year ended 31 December 2021.
The results for the year are set out on page 9.
The Company has not paid any dividends during the year (2020: £nil).
The Directors who held office during the year and up to the date of signature of the financial statements were as follows:
The Directors and secretary and their families had no interest in the shares of the Company, or in any companies of the Group at any time during the period which are greater than 1% of the nominal value of either the Company or its ultimate parent.
Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes of the applicant concerned. In the event of members of staff becoming disabled, every effort is made to ensure that their employment within the Company continues and that appropriate training is arranged. It is Company policy that the training, career development and promotion of disabled persons should, as far as possible, be identical to that of other employees.
The Company is reliant on the continued operation of its sole customer contract, which was renewed in April 2022, and subject to annual renewal thereafter. The uncertainty associated with the renewal of the contract is an on-going operational risk for the Company. The Directors consider that the assets presented in the balance sheet are fully recoverable should the customer contract not be renewed in 2023. Since the balance sheet shows net assets of £677,373 (2020: £513,489), the Company can settle its liabilities as they fall due over the next twelve months.
As a result, the Directors consider it appropriate to prepare the f inancial s tatements on a g oing c oncern basis . Refer note 1.1 for further explanation.
The Directors who held office at the date of approval of this Directors' report confirm that, so far as that they are aware, there is no relevant audit information of which the Company's auditor is unaware; and the Directors have taken all steps they ought to have taken as Directors to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of the information.
KPMG, having indicated its willingness to continue in office, will be deemed to be reappointed as auditor under section 487(2) of the Companies Act 2006.
We have audited the financial statements of Capita Customer Solutions (UK) Limited (‘the Company’) for the year ended 31 December 2021 set out on pages 9 to 25, which comprise the income statement, the balance sheet, the statement of changes in equity and related notes, including the summary of significant accounting policies set out in note 1.The financial reporting framework that has been applied in their preparation is UK Law and FRS 101 Reduced Disclosure Framework.
Basis for opinion
We draw attention to note 1 in the financial statements, which indicates that that Capita PLC, the Company’s ultimate parent have been exploring refinancing of debt maturities, in addition to continuing the previously announced disposal program to address the medium-term resilience of the Group. The Company is reliant on the Group support to continue as a going concern. As stated in note 1, these events or conditions, along with the other matters explained in note 1, indicate that a material uncertainty exists that may cast significant doubt on the Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.
The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Company or to cease their operations, and as they have concluded that the Company’s financial position means that this is realistic. As set out in note 1 in the financial statements, they have also concluded that there is a material uncertainty that could cast significant doubt over their ability to continue as a going concern for at least a year from the date of approval of the financial statements (“the going concern period”).
In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
We identified the areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements and risks of material misstatement due to fraud, using our understanding of the entity's industry, regulatory environment and other external factors and inquiry with the directors. In addition, our risk assessment procedures included: inquiring with the directors as to the Company’s policies and procedures regarding compliance with laws and regulations and prevention and detection of fraud; inquiring whether the directors have knowledge of any actual or suspected non-compliance with laws or regulations or alleged fraud; inspecting the Company’s regulatory and legal correspondence; and reading Board minutes.
We discussed identified laws and regulations, fraud risk factors and the need to remain alert among the audit team.
The Company is subject to laws and regulations that directly affect the financial statements including companies and financial reporting. We assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items, including assessing the financial statement disclosures and agreeing them to supporting documentation when necessary.
The company, is not subject to other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements.
Auditing standards limit the required audit procedures to identify non-compliance with these non-direct laws and regulations to inquiry of the directors and other management and inspection of regulatory and legal correspondence, if any. These limited procedures did not identify actual or suspected non-compliance.
We assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. As required by auditing standards, we performed procedures to address the risk of management override of controls. We did not identify any additional fraud risks.
In response to risk of fraud, we also performed procedures including: identifying journal entries to test based on risk criteria and comparing the identified entries to supporting documentation; evaluating the business purpose of significant unusual transactions; assessing significant accounting estimates for bias; and assessing the disclosures in the financial statements.
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations (irregularities) is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it.
In addition, as with any audit, there remains a higher risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. We are not responsible for preventing non-compliance and cannot be expected to detect non-compliance with all laws and regulations.
The directors are responsible for the other information presented in the Annual Report together with the financial statements. The other information comprises the information included in the strategic report and the directors’ report. The financial statements and our auditor’s report thereon do not comprise part of the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work we have not identified material misstatements in the other information.
Based solely on our work on the other information undertaken during the course of the audit:
we have not identified material misstatements in the directors' report or the strategic report;
in our opinion, the information given in the directors’ report and the strategic report is consistent with the financial statements;
in our opinion, the directors’ report and the strategic report have been prepared in accordance with the Companies Act 2006.
A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities .
Our 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.
The income statement has been prepared on the basis that all operations are continuing operations.
There are no recognised gains and losses other than those passing through the income statement.
Share capital
The balance classified as share capital is the nominal proceeds on issue of the Company's equity share capital, comprising 2,150,001 ordinary share of £1.
Retained deficit
Represents accumulated losses of the Company.
Capita Customer Solutions (UK) Limited is a company incorporated and domiciled in the U nited K ingdom . The registered number of the Company is 07886341 and the address of its registered office is 65 Gresham Street, London, United Kingdom, EC2V 7NQ. The financial statements are prepared in accordance with FRS 101 Reduced Disclosure framework but amendments have been made where necessary, to comply with the Companies Act, 2006.
The financial statements are prepared under the historical cost basis except where stated otherwise and in accordance with applicable accounting standards.
In determining the appropriate basis of preparation for the annual report and financial statements for the year ended 31 December 2021, the Company’s Directors ( ' the Directors ' ) are required to consider whether the Company can continue in operational existence for the foreseeable future, being a period of at least twelve months following the approval of these financial statements. The Directors have concluded that it is appropriate to adopt the going concern basis, having undertaken a rigorous assessment of the financial forecasts, key uncertainties, and sensitivities, as set out below.
Board assessment
Base case scenario
The Company earned a net profit of £ 163,884 during the year ended 31 December 202 1 (20 20 : £185,270) and, at that date, the Company had net assets of £ 677,373 (20 20 : £513,489).
The financial forecasts used for the going concern assessment are derived from the 2022-2023 business plans (‘BP’) for the Company which have been subject to review and challenge by management and the Directors. The Directors have approved the projections. Under the base case scenario, completion of Capita plc’s group wide transformation programme has simplified and strengthened the business and facilitates further efficiency savings enabling sustainable growth in revenue, profit, and cash flow over the medium term.
The Company is reliant on the continued operation of its sole customer contract, which was renewed in April 2022, and subject to annual renewal thereafter. The uncertainty associated with the renewal of the contract is an on-going operational risk for the Company. The Directors consider that the assets presented in the balance sheet are fully recoverable should the customer contract not be renewed in 2023. Since the balance sheet shows net assets of £677,373 (2020: £513,489), the Company can settle its liabilities as they fall due over the next twelve months.
Severe but plausible downsi de
In addition to the base case, the Directors have also considered severe but plausible downside scenarios. The Directors have taken account of trading downside risks, which assume the Company is not successful in delivering the anticipated levels of revenue, profit, and cash flow growth. The downside scenario used for the going concern assessment also includes potential adverse financial impacts due to additional inflationary pressure which cannot be passed on the customers, not achieving targeted margins on new or major contracts, unforeseen operational issues leading the contract losses and cash outflows, and unexpected potential fines and losses linked to incidents such as data breaches and/or cyber-attacks.
Offsetting these risks the Directors have considered available mitigations within the direct control of the Company, including reductions to variable pay rises, setting aside any bonus payments and limiting discretionary spend.
Reliance on Capita plc (‘the Group’)
The Director’s assessment of going concern has considered the extent to which the Company is reliant on the Group. The Company is reliant on the Group in respect of the following:
provision of certain services, such as administrative support & IT services and should the Group be unable to deliver these services, the Company would have difficulty in continuing to trade ;
participation in the Group’s notional cash pooling arrangements, of which £403,010 was held at 31 August 2022. In the event of a default by the Group, the Company may not be able to access its facility within the pooling arrangement; and
recovery of receivables of £ 471,827 from fellow Group undertakings as of 31 August 2022 . If these receivables are not able to be recovered when forecast by the Company, then the Company may have difficulty in continuing to trade .
Given the reliance the Company has on the Group, the Directors have considered the financial position of the ultimate parent undertaking as disclosed in its most recent consolidated financial statements, being for the six months period ended 30 June 2022.
Ultimate parent undertaking – Capita plc
The Capita plc Board (‘the Board’) concluded that it was appropriate to adopt the going concern basis, having undertaken a rigorous assessment of the financial forecasts, key uncertainties, and sensitivities, when preparing the Group’s condensed consolidated financial statements at 30 June 2022. These condensed consolidated financial statements were approved by the Board on 4 August 2022 and are available on the Group’s website ( www.capita.com/investors ). Below is a summary of the position at 4 August 2022:
Accounting standards require that ‘the foreseeable future’ for going concern assessment covers a period of at least twelve months from the date of approval of these condensed consolidated financial statements, although those standards do not specify how far beyond twelve months a Board should consider. In its going concern assessment, the Board has considered the period from the date of approval of these condensed consolidated financial statements to 31 December 2023, which is just less than eighteen months from the date of approval of the Group condensed consolidated financial statements ('the going concern period') and includes the scheduled repayments of private placement loan notes in the second half of 2023.
The base case financial forecasts demonstrate liquidity headroom and compliance with all covenant measures throughout the going concern period to 31 December 2023.The base case projections used for going concern assessment purposes reflect business disposals completed up to the date of approval of these condensed consolidated financial statements but do not reflect the benefit of any further disposals that are in the pipeline. The liquidity headroom assessment in the base case projections reflects the Group’s existing committed financing facilities and debt redemptions and does not reflect any potential future refinancing.
The principal mitigation to the possibility of insufficient liquidity in the severe but plausible downside scenario is the continuation of the Board approved disposal programme which covers businesses that do not align with the Group’s longer-term strategy. The Group has a strong track record of executing major disposals. In 2021, the Board targeted to achieve £700m of disposal proceeds by 30 June 2022 and has exceeded this target. The disposal programme continues, with further disposal processes launched in 2022. The Board is confident that the disposal programme will be delivered, thereby introducing substantial net cash proceeds to the Group, albeit with a corresponding removal of consolidated profits and cash flows associated with the disposal businesses.
In addition to the ongoing disposal programme, the Group may seek to mitigate the liquidity risks which might arise in the downside scenario by seeking further sources of financing beyond its existing committed funding facilities. The Board has been successful in obtaining new and extended financing facilities in recent years, most recently the extension of the RCF which was signed in July 2022.
Material uncertainties related to the Group:
The Board recognises that the disposal programme requires agreement from third parties and that major disposals may be subject to shareholder and, potentially, lender and regulatory approval. Similarly, any new refinancing requires agreement with lenders. Such agreements and approvals are outside the direct control of the Group. Therefore, given that some of the mitigating actions which might be taken to strengthen the Group's liquidity position in the severe but plausible downside scenario are outside the control of the Group, this gives rise to material uncertainties, as defined in accounting standards, relating to events and circumstances which may cast significant doubt about the Group’s ability to continue as a going concern and to continue in operation and discharge its liabilities in the normal course of business.
Adoption of going concern basis by the Group:
Reflecting the Board’s confidence in the benefits expected from the completion of the transformation programme and execution of the approved disposal programme coupled with the potential to obtain further financing beyond its existing committed funding facilities, the Group continues to adopt the going concern basis in preparing these condensed consolidated financial statements. The Board has concluded that the Group will be able to continue in operation and meet their liabilities as they fall due over the period to 31 December 2023. Consequently, these condensed consolidated financial statements do not include any adjustments that would be required if the going concern basis of preparation were to be inappropriate.
Conclusion
Although the Company has a reliance on the Group as detailed above, even in a severe but plausible downside for both the Company and the Group, the Directors are confident the Company will continue to have adequate financial resources to continue in operation and discharge its liabilities as they fall due over the period to 31 December 2023 (the “going concern period”). Consequently, the annual report and financial statements have been prepared on the going concern basis.
However, as the Group’s condensed consolidated financial statements have identified material uncertainties giving rise to significant doubt over the Group’s ability to continue as a going concern, given the Company’s reliance on the Group as set out above, this in turn gives rise to a material uncertainty relating to events and circumstances which may cast significant doubt about the Company’s ability to continue as a going concern and, therefore, that the Company may be unable to continue in operation and discharge its liabilities in the normal course of business. The financial statements do not include any adjustments which would be required if the going concern basis of preparation were to be deemed inappropriate.
The Company has applied FRS101 – Reduced Disclosure Framework in the preparation of its financial statements. The Company has prepared and presented these financial statements by applying the recognition, measurement and disclosure requirements of international accounting standards in conformity with the requirements of the Companies Act 2006.
The Company's ultimate parent undertaking, Capita plc, includes the Company in its consolidated statements. The consolidated financial statements are prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and with UK-adopted International Financial Reporting Standards (IFRSs) and the Disclosure and Transparency Rules of the UK's Financial Conduct Authority. These are available to the public and may be obtained from Capita plc’s website on https://www.capita.com/investors .
In these financial statements, the Company has applied the disclosure exemptions available under FRS 101 in respect of the following disclosures:
A cash flow statement and related notes;
Comparative period movements for share capital, property, plant & equipment and intangible assets;
Disclosures in respect of transactions with wholly owned subsidiaries;
Disclosures in respect of capital management;
The effects of new but not yet effective IFRSs;
An additional balance sheet for the beginning of the earliest comparative period following the retrospective change in accounting policy;
Certain disclosures regarding IFRS 15 Revenue from Contracts with Customers; and
Disclosures in respect of the compensation of key management personnel.
Since the consolidated financial statements of Capita plc include equivalent disclosures, the Company has also taken the disclosure exemptions under FRS 101 available in respect of the following disclosure:
Certain disclosures required by IFRS 13 Fair Value Measurement and the disclosures required by IFRS 7 Financial Instrument Disclosures.
Government grants are not recognised until there is a reasonable assurance that the Company will comply with the conditions attaching to them and that the grants will be received. Government grants are recognised in the income statement on a systematic basis over the periods in which the Company recognises as expenses the related costs for which the grants are intended to compensate. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Company with no future related costs are recognised in the income statement in the period in which they become receivable.
Revenue is earned within the United Kingdom.
The company derives its revenue from one contract Department for Environment, Food & Rural Affairs ('DEFRA') in the UK which is for the provision and maintenance of Sheep, Goats and Deer movement database. The revenue is derived from two distinct revenue streams, transition revenues for the configuration and sale of an electronic database and ongoing service revenue for the provision of reports, helpline and the recording of animal movements. Under IFRS 15 it has been determined that only one performance obligation exists and contract revenue is recognised on this basis. The Company has adopted the use of the practical expedient for the recognition of ongoing service revenue. It has the right to invoice DEFRA the amount corresponding directly with the performance to date and therefore can recognise revenue of that amount. To date the Company has not incurred service credits.
The revenue and profits recognised in any period are based on the delivery of performance obligations and an assessment of when control is transferred to the customer.
In determining the amount of revenue and profits to record, and related balance sheet items (such as contract fulfilment assets, capitalisation of costs to obtain a contract, trade receivables, accrued income and deferred income) to recognise in the period, management is required to form a number of key judgements and assumptions. This includes an assessment of the costs the Company incurs to deliver the contractual commitments and whether such costs should be expensed as incurred or capitalised. These judgements are inherently subjective and may cover future events such as the achievement of contractual milestones, performance KPIs and planned cost savings. In addition, key assumptions are made concerning contract extensions and amendments, as well as opportunities to use the systems and technologies developed for the contract in other similar projects.
Revenue is recognised 'over time' as control of the performance obligation is transferred to the customer.
At contract inception the total transaction price is estimated, being the amount to which the Company expects to be entitled and has rights to under the present contract.
The transaction price does not include estimates of consideration resulting from change orders for additional goods and services unless these are agreed.
Where the Company recognises revenue over time for long term contracts, this is in general due to the Company performing and the customer simultaneously receiving and consuming the benefits provided over the life of the contract.
For each performance obligation to be recognised over time, the Company applies a revenue recognition method that faithfully depicts the Company’s performance in transferring control of the goods or services to the customer. This decision requires assessment of the real nature of the goods or services that the Company has promised to transfer to the customer.
The Company disaggregates revenue from contracts with customers by contract type, because management believe this best depicts how the nature, amount, timing and uncertainty of the Company’s revenue and cash flows are affected by economic factors.
As noted above, the Company derives its revenue from only one contract (DEFRA), which has one performance obligation with two distinct services (i) the provision of an electronic database and (ii) the ongoing maintenance of this database recording animal movements for Sheep, Goats and Deer. These services are highly interrelated. The performance obligation is delivered on a monthly basis and the client is billed based on volumes. The payment terms are 30 days in arrears and to date the Company has not incurred service credits.
The Company recognises revenue using the output method because it best reflects the nature in which the Company is transferring control of the goods or services to the customer.
Contract related assets and liabilities
As a result of the contracts which the Company enters into with its customers, a number of different assets and liabilities are recognised on the Company’s balance sheet. These include but are not limited to:
Contract fulfilment assets
Contract fulfilment costs are divided into (i) costs that give rise to an asset; and (ii) costs that are expensed as incurred.
When determining the appropriate accounting treatment for such costs, the Company firstly considers any other applicable standards. If those other standards preclude capitalisation of a particular cost, then an asset is not recognised under IFRS 15.
If other standards are not applicable to contract fulfilment costs, the Company applies the following criteria which, if met, result in capitalisation: (i) the costs directly relate to a contract or to a specifically identifiable anticipated contract; (ii) the costs generate or enhance resources of the entity that will be used in satisfying (or in continuing to satisfy) performance obligations in the future; and (iii) the costs are expected to be recovered.
The assessment of this criteria requires the application of judgement, in particular when considering if costs generate or enhance resources to be used to satisfy future performance obligations and whether costs are expected to be recoverable. The Company incurred upfront electronic database implementation costs to deliver the ongoing maintenance services under the DEFRA contract (referred to as ‘transformation’ costs).
These costs include process mapping and design, system development, project management, hardware, software licence costs, recruitment costs and training.
Deferred and accrued income
The payment terms for DEFRA are 30 days in arrears. Where payments made are greater than the revenue recognised at the period end date, the Company recognises a deferred income contract liability for this difference. Where payments made are less than the revenue recognised at the period end date, the Company recognises an accrued income contract asset for this difference. The DEFRA contract has given rise to deferred revenue because the transition revenue i.e. revenue associated with the provision of the electronic database system was received upfront. Since there is only one performance obligation in the contract this revenue needs to be recognised over time giving rise to a deferred income contract liability.
Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset over its expected useful life, as follows:
Computer equipment 3-5 years
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity or other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax assets and unused tax losses can be utilised, except where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.
Borrowing costs that are directly attributable to the acquisition, construction or production of an asset that takes a substantial time to be prepared for use, are capitalised as part of the cost of that asset. Other interest receivable and similar income include interest receivable on funds invested and net foreign exchange gains.
Investments and other financial assets
Classification
The Company classifies its financial assets in the following measurement categories:
those to be measured subsequently at fair value (either through OCI or through profit or loss); and
those to be measured at amortised cost.
The classification depends on the Company ’s business model for managing the financial assets and the contractual terms of the cash flows.
Recognition and derecognition
Purchases and sales of financial assets are recognised on the trade date (the date on which the Company commits to purchase or sell the asset). Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Company has transferred substantially all the risks and rewards of ownership.
Measurement
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in income statement.
Impairment
The Company assesses, on a forward-looking basis, the expected credit losses associated with its debt instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
Trade and other receivables
The Company assesses on a forward-looking basis the expected credit losses associated with its receivables carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables, the Company applies the simplified approach permitted by IFRS 9, resulting in trade receivables recognised and carried at original invoice amount less an allowance for any uncollectible amounts based on expected credit losses.
Trade and other payables
Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method.
Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less . Bank overdrafts are shown within current financial liabilities.
The preparation of financial statements in accordance with generally accepted accounting principles requires the directors to make judgements and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingencies at the date of the financial statements and the reported income and expense during the presented periods. Although these judgements and assumptions are based on the directors’ best knowledge of the amount, events or actions, actual results may differ.
The total revenue amounted to £759,689 for the year ended 2021 (2020: £713,069). The revenue for the year has been derived from its principal activity wholly undertaken in the United Kingdom.
Audit fees are borne by the ultimate parent undertaking, Capita plc. The audit fee for the current period was £6,000 (2020: £6,000).
The Company has taken advantage of the exemption provided by regulations 6(2)(b) of the Companies (Disclosure of Auditor Remuneration and Liability Limitation Agreements) Regulations 2008 not to provide information in respect of fees for other (non-audit) services because this information is required to be given in the consolidated financial statements of the ultimate parent undertaking, which it is required to prepare in accordance with the Companies Act 2006.
The reconciliation between tax charge and the accounting profit multiplied by the UK corporation tax rate for the years ended 31 December 2021 and 2020 is as follows:
The average monthly number of employees (including non-executive D irectors) w ere :
Their aggregate remuneration comprised:
The Directors have not provided qualifying services to the Company and are paid by other companies within the Capita Group. Their remuneration has not been allocated to the Company.
In addition to the above, the Directors of the Company were reimbursed for the expenses incurred by them whilst performing business responsibilities .
At 31 December 2021, the Company did not have any commitments or contingencies (2020: £nil).
The Company is controlled by its immediate parent Company, Capita Customer Solutions Limited, a company incorporated in Ireland.
The ultimate parent Company undertaking of Capita Customer Solutions Limited is Capita plc, a company registered in England and Wales. The consolidated financial statements of Capita plc are available from it's registered office at 65 Gresham Street, London, England, EC2V 7NQ.
There are no significant events which have occurred after the reporting period that require adjustment to or disclosure in these financial statements.