Rhealisation LLP
Report and Financial Statements
Year Ended
30 April 2017
LLP Number OC326278
Rhealisation LLP
Report and Financial Statements
for the year ended 30 April 2017
Contents
Page:
1
Members' report
2
Statement of members' responsibilities
3
Independent auditor's report
5
Consolidated income statement
6
Consolidated balance sheet
8
Consolidated statement of cash flows
9
LLP balance sheet
10
Notes forming part of the financial statements
Designated members
C R Baker
D J Bastide
J W M Chadwick
M N Cross
Registered office
Belmont House
Station Way
Crawley
RH10 1JA
LLP number
OC326278
Auditors
BDO LLP, 55 Baker Street, London, W1U 7EU
Rhealisation LLP
Members' Report
for the year ended 30 April 2017
The members are pleased to present their report and the audited consolidated financial statements of the Rhealisation LLP group for the year ended 30 April 2017.
Principal activity and review of the business
The principal activity of the Group was previously the provision of legal services in the United Kingdom. However, in December 2015, the trade and assets of the Group were acquired by Irwin Mitchell LLP and this trade ceased. Since the cessation of the trade the members have sought to realise the remaining assets of the group and settle the remaining liabilities in an orderly fashion.
There are no overseas branches.
Designated Members
The designated members of the LLP throughout the year were:
C R Baker
D J Bastide
M N Cross
J W M Chadwick
Members' drawings and the subscription and repayment of members' capital
Members' capital in total is linked to the financial requirements of the LLP and is contributed by members in equal amounts, with new members contributing a full capital balance during the first four years of partnership. Capital is repaid to retiring members at the same value at which they contributed it.
The LLP's drawings policy provides for a monthly payment to each member on account of their share of the profit. The balance of their share, net of retention of tax, is paid within 12 months of the financial year end subject to the LLP's cash requirements.
Auditors
All of the Members as at the date of this report have taken all the steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information. The Members are not aware of any relevant audit information of which the LLP's auditor is unaware.
Approval
This Members' Report was approved by order of the Board on 9 May 2018.
D J Bastide
Designated member
1
Rhealisation LLP
Statement of Members' Responsibilities
Members' responsibilities
The members are responsible for preparing the members' report and the financial statements in accordance with applicable law and regulation.
The Limited Liability Partnerships (Accounts and Audit) (Application of the Companies Act 2006) Regulations 2008 require the members to prepare financial statements for each financial year. Under these regulations the members have elected to prepare the group and Limited Liability Partnership financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under these regulations the members must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and Limited Liability Partnership and of the profit or loss of the group for that period.
In preparing these financial statements, the members are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Limited Liability Partnership will continue in business. As explained in note 1 to the financial statements, the members do not believe the going concern basis to be appropriate and, in consequence, these financial statements have not been prepared on that basis.
The members are responsible for keeping adequate accounting records that are sufficient to show and explain the Limited Liability Partnership's transactions, disclose with reasonable accuracy at any time the financial position of the Limited Liability Partnership, and enable them to ensure that the financial statements comply with the Limited Liability Partnerships (Accounts and Audit) (Application of the Companies Act 2006) Regulations 2008. They are also responsible for safeguarding the assets of the Limited Liability Partnership and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
2
Rhealisation LLP
Independent auditor's report
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF RHEALISATION LLP
We have audited the financial statements of Rhealisation LLP for the year ended 30 April 2017 which comprise the consolidated income statement, the consolidated balance sheet, the consolidated statement of cash flows, the LLP balance sheet and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
This report is made solely to the limited liability partnership's members, as a body, in accordance with the Limited Liability Partnerships (Accounts and Audit) (Application of the Companies Act 2006) Regulations 2008. Our audit work has been undertaken so that we might state to the limited liability partnership'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 limited liability partnership and the limited liability partnership's members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of members and auditors
As explained more fully in the statement of members' responsibilities, the members are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Financial Reporting Council's (FRC's) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the FRC's website at www.frc.org.uk/auditscopeukprivate.
Basis for qualified opinion on financial statements
In the prior year, the audit evidence available to us was limited because the members could not provide supporting documentation in relation to the disclosed amounts in the related party transactions note 23 to the financial statements due to these records not being available. This was due to the accounting records transferring after a merger had taken place. Had this information been available to us we might have formed a different opinion on the financial statements.
Qualified opinion on financial statements
In our opinion, except for the possible effects of the matter described in the Basis of qualified opinion paragraph, the financial statements:
give a true and fair view of the state of the group's and the limited liability partnership's affairs as at 30 April 2017 and of the group's profit for the year then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006 as applied to limited liability partnerships by the Limited Liability Partnerships (Accounts and Audit) (Application of the Companies Act 2006) Regulations 2008.
Emphasis of matter – Going concern
In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosures made in note 1 to the financial statements concerning the group and LLP's ability to continue as a going concern. The group and LLP have ceased trading and the financial statements are not prepared on a going concern basis. Our opinion is not modified in respect of this matter.
3
Rhealisation LLP
Independent auditor's report (continued)
Matters on which we are required to report by exception
In respect solely of the limitation on our work relating to related party transactions, described above:
we have not obtained all the information and explanations that we considered necessary for the purpose of our audit; and
we were unable to determine whether adequate accounting records had been kept by the limited liability partnership.
We have nothing to report in respect of the following matters where the Companies Act 2006 as applied to limited liability partnerships requires us to report to you if, in our opinion:
returns adequate for our audit have not been received from branches not visited by us; or
the limited liability partnership financial statements are not in agreement with the accounting records and returns.
Nicholas Carter-Pegg (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
London
United Kingdom
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
4
Rhealisation LLP
Consolidated income statement
for the year ended 30 April 2017
Continuing
Discontinued
Continuing
Discontinued
operations
operations
Total
Total
operations
operations
Note
2017
2017
2017
2016
2016
2016
£
£
£
£
£
£
(as restated)
(as restated)
Turnover
1
-
-
-
-
23,663,122
23,663,122
Cost of sales
-
-
-
-
-
-
_______
_______
_______
_______
_______
_______
Gross profit
-
-
-
-
23,663,122
23,663,122
Distribution costs
Administrative expenses
(17,713,606)
-
(585,462)
(585,462)
(987,260)
(16,726,346)
(Loss) / Profit on disposal of operations
12,686,679
-
(108,000)
(108,000)
-
12,686,679
21
Other operating income
-
-
-
463,410
327,604
791,014
_______
_______
_______
_______
_______
_______
Group operating profit
3
-
(693,462)
(693,462)
(523,850)
19,951,059
19,427,209
Income from other fixed asset investments
65,317
65,317
-
-
-
Other interest receivable
and similar income
7
-
6,232
6,232
-
98,695
98,695
Interest payable and similar charges
6
-
-
-
-
(80,223)
(80,223)
Income from current asset investments
Other income
_______
_______
_______
_______
_______
_______
(Loss) / Profit on ordinary activities before taxation
-
(621,913)
(621,913)
(523,850)
19,969,531
19,445,681
Taxation on profit on
ordinary activities
8
-
5,824
5,824
-
(138,297)
(138,297)
_______
_______
_______
_______
_______
_______
(Loss) / Profit for the financial year before members' remuneration and profit shares
-
(616,089)
(616,089)
(523,850)
19,831,234
19,307,384
Members' remuneration charged as an expense
18
(19,307,384)
-
616,089
616,089
523,850
(19,831,234)
_______
_______
_______
_______
_______
_______
(Loss) / Profit for the financial year available for discretionary division among members
18
-
-
-
-
-
-
_______
_______
_______
_______
_______
_______
The notes on pages 10 to 28 form part of these financial statements.
5
Rhealisation LLP
Consolidated balance sheet
at 30 April 2017
Registered number OC326278
Note
2017
2017
2016
2016
£
£
£
£
Fixed assets
Tangible assets
9
-
1,112
Investments
10
2,727,655
2,775,655
_______
_______
2,727,655
2,776,767
Current assets
Financial Assets
12
-
1,429
Debtors
11
2,619,113
6,719,595
Cash at bank and in hand
702,030
2,641,545
_______
_______
3,321,143
9,362,569
Creditors: amounts falling due within one year
13
(29,000)
(496,237)
_______
_______
Net current assets
3,292,143
8,866,332
_______
_______
Total assets less current liabilities
6,019,798
11,643,099
Provisions for liabilities
14
(440,000)
(233,516)
_______
_______
Net assets attributable to members
18
5,579,798
11,409,583
_______
_______
The notes on pages 10 to 28 form part of these financial statements.
6
Rhealisation LLP
Consolidated balance sheet
at 30 April 2017 (continued)
Note
2017
2016
£
£
Represented by:
Loans and amounts due to Members
Members' capital classified as a liability
18
-
-
Other amounts
18
5,578,074
11,408,810
Equity attributable to the members of the parent LLP
Members' other interests classified as equity
18
1,724
773
Other reserves
_______
_______
5,579,798
11,409,583
_______
_______
The financial statements were approved by the members and authorised for issue on 9 May 2018.
M N Cross
D J Bastide
Designated Member
Designated
Member
The notes on pages 10 to 28 form part of these financial statements.
7
Rhealisation LLP
Consolidated statement of cash flows
for the year ended 30 April 2017
Note
2017
2016
£
£
(as restated)
Cash flows from operating activities
Profit for the financial year before members' remuneration
and profit shares
(616,089)
19,307,384
Adjustments for:
Depreciation, impairment and amortisation of fixed assets
1,112
270,688
(Profit)/Loss on sale of tangible fixed assets
-
(214,748)
Income from other fixed asset investments
(65,317)
-
Surrender of fixed asset investment
48,000
-
Net provision increase
275,866
-
Receivable write down
108,000
-
Revaluation / impairment of current asset investments
12
1,429
7,142
Net interest (payable)
(6,232)
(18,472)
Taxation expense / (credit)
(5,824)
138,297
Decrease in trade and other debtors
2,297,482
7,663,434
(Decrease)/Increase in trade and other creditors
(467,237)
(3,777,301)
(Decrease)/Increase in provisions
14
(69,382)
(430,173)
__________
__________
Cash from operations
1,501,808
22,946,251
Taxation reimbursed / (paid)
8
5,824
(221,801)
Members' drawings in relation to remuneration
18
(3,518,696)
(12,202,827)
__________
__________
Net cash generated from operating activities
(3,512,872)
10,521,623
__________
__________
Cash flows from investing activities
Proceeds from sale of tangible fixed assets
-
3,051,013
Proceeds from sale of fixed asset investments
65,317
-
Purchases of tangible fixed assets
-
(83,565)
Interest received
7
6,232
98,695
Sale of business operations
-
1,811,000
__________
__________
Net cash from investing activities
71,549
4,877,143
__________
__________
Cash flows from financing activities
Capital element of lease repaid
-
(16,113)
Capital repaid to members
18
-
(7,695,584)
Interest paid
6
-
(76,864)
Interest element of lease repaid
6
-
(3,359)
Bank loans repaid
-
(5,736,362)
__________
__________
Net cash used in financing activities
-
(13,528,282)
__________
__________
Net increase/(decrease) in cash and cash equivalents
(1,939,515)
1,870,484
_______
_______
Cash and cash equivalents at beginning of the year
2,641,545
771,061
Cash and cash equivalents at end of year
702,030
2,641,545
__________
__________
Cash and cash equivalents comprise:
Cash at bank and in hand
702,030
2,641,545
_______
_______
8
10
Rhealisation LLP
LLP balance sheet
at 30 April 2017
Registered number OC326278
Note
2017
2017
2016
2016
£
£
£
£
(as restated)
(as restated)
Fixed assets
Tangible assets
9
-
1,112
Investments
10
2,728,657
2,776,657
_______
_______
2,728,657
2,777,769
Current assets
Financial assets
12
-
1,429
Debtors
11
2,639,498
6,711,770
Cash at bank and in hand
672,921
2,627,212
_______
_______
3,312,419
9,340,411
Creditors: amounts falling due within one year
13
(23,002)
(475,854)
_______
_______
Net current assets
3,289,417
8,864,557
_______
_______
Total assets less current liabilities
6,018,074
11,642,326
Provision for liabilities
14
(440,000)
(233,516)
_______
_______
Net assets attributable to members
19
5,578,074
11,408,810
_______
_______
Represented by:
Loans and amounts due to Members
Members' capital classified as a liability
-
-
Other amounts
19
5,578,074
11,408,810
_______
_______
5,578,074
11,408,810
_______
_______
The LLP has taken advantage of the exemption allowed under the Companies Act 2006 as applied to LLPs and has not presented its own statement of comprehensive income in these financial statements. The loss before Members' remuneration and profit shares of the parent LLP for the year was £617,040 (2016 - £20,591,879 profit).
The financial statements were approved by the Board of Members and authorised for issue on 9 May 2018.
M N Cross
D J Bastide
Designated Member
Designated
Member
The notes on pages 10 to 28 form part of these financial statements.
9
Rhealisation LLP
Notes forming part of the financial statements
for the year ended 30 April 2017
1
Accounting policies
The financial statements have been prepared in accordance with FRS 102 the Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland, including the Statement of Recommended Practice (2015), ‘Accounting by Limited Liability Partnerships'.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires Group management to exercise judgement in applying the Group's accounting policies (see note 2). 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 £1.
Parent LLP disclosure exemptions
In preparing the separate financial statements of the parent LLP, advantage has been taken of the following disclosure exemptions available in FRS 102:
No cash flow statement has been presented for the parent LLP;
No disclosure has been given for the aggregate remuneration of the key management personnel of the parent LLP as their remuneration is included in the totals for the group as a whole.
The following principal accounting policies have been applied in respect to the comparative period and, where appropriate, the current period:
Basis of consolidation
The consolidated financial statements present the results of Rhealisation LLP and its subsidiaries ("the Group") as if they formed a single entity. Intergroup transactions and balances between group companies are therefore eliminated in full.
Going concern
As disclosed within the members report, the LLP and its group have ceased trading and no longer meet the going concern criteria. Accordingly, the financial statements have been prepared on a basis other than that of a going concern. No adjustments have been made to the financial statements as a result of preparing them on the basis and the members consider that the value of the assets and liabilities, as disclosed within these financial statements, represent the realisable values of each.
Tangible fixed assets
Tangible fixed assets are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
Depreciation
Depreciation was provided at rates calculated to write off the cost, less estimated residual value, on each asset over its expected useful life, as follows:
Freehold properties
2% on a straight line basis
Leasehold improvements
Straight line depreciation over the term of the lease
Office furniture and telephone equipment
25% on a straight line basis
Computer hardware
33 1/3% on a straight line basis
Computer software, bar practice management system
50% on a straight line basis
Practice management system
25% on a straight line basis
Motor vehicles
25% on a reducing balance basis
10
Rhealisation LLP
Notes forming part of the financial statements
for the year ended 30 April 2017 (continued)
1
Accounting policies (continued)
The assets' residual values, useful lives and depreciation methods were reviewed, and adjusted prospectively if appropriate, if there was an indication of a significant change since the last reporting date.
Intangible assets: Goodwill
Goodwill arising on the acquisition of businesses represented any excess of the fair value of the consideration given over the fair value of the identifiable assets and liabilities acquired was capitalised and written off on a straight line basis over its useful economic life.
Negative goodwill was similarly included in the balance sheet and was credited to the profit and loss account in the periods in which the acquired non-monetary assets were recovered through depreciation, which was 3 ½ years. Negative goodwill in excess of the fair values of the non-monetary assets acquired was credited to the profit and loss account in the period expected to benefit.
Impairment of fixed assets and goodwill
Assets that were subject to depreciation or amortisation were assessed at each reporting date to determine whether there was any indication that the assets are impaired. Where there was any indication that an asset may be impaired, the carrying value of the asset (or cash-generating unit to which the asset has been allocated) was tested for impairment. An impairment loss was recognised for the amount by which the asset's carrying amount exceeded its recoverable amount. The recoverable amount was the higher of an asset's (or CGU's) fair value less costs to sell and value in use. For the purposes of assessing impairment, assets were grouped at the lowest levels for which there were separately identifiable cash flows (CGUs). Non-financial assets that had been previously impaired were reviewed at each reporting date to assess whether there was any indication that the impairment losses recognised in prior periods may no longer exist or may have decreased.
Fixed asset investments
Fixed assets investments at 30 April 2017 are stated at cost, net of amortisation and any provision for impairment save for the investment by Rhealisation LLP in Thesis Asset Management Plc.
At 30 April 1998, on conclusion of a merger, the investment in Thesis Asset Management was uplifted to reflect the Members' valuation of that asset. Subsequent investments have been accounted for at cost.
Financial assets – Available for sale
Available for sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period.
Purchases of financial assets are recognised on the trade-date. Investments are initially recognised at fair value. Gains and losses arising from changes in fair value are recognised through the profit and loss account.
Amounts recoverable from clients in respect of unbilled work performed
In the comparative period, services provided during a year to clients, that at a reporting date had not yet been billed, were recognised as turnover in accordance with FRS 102. Turnover was recognised by reference to an assessment of the fair value of the services provided at the relevant reporting date as a proportion of the total value of the engagement.
Provision was made against unbilled amounts on those client engagements where the right to receive consideration was contingent on factors outside the control of the limited liability partnership, and therefore provided amounts were not included in turnover.
11
Rhealisation LLP
Notes forming part of the financial statements
for the year ended 30 April 2017 (continued)
1
Accounting policies (continued)
Current and deferred taxation
Taxation on a member's share of the LLP's profits (or losses) is solely the personal liability of the individual members and consequently is not dealt with in these financial statements. The tax within these consolidated financial statements relate to the corporate subsidiaries of the group.
The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except that a change attributable to an item of income or expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.
The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date in the countries where the LLP's subsidiaries operate and generate taxable income.
Deferred balances are recognised in respect of all timing differences that have originated but not reversed by the balance sheet date, except:
The recognition of deferred tax assets is limited to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits;
Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met; and
Where timing differences relate to interests in subsidiaries, associates, branches and joint ventures and the group can control their reversal and such reversal is not considered probable in the foreseeable future.
Deferred tax balances are not recognised in respect of permanent differences except in respect of business combinations, when deferred tax is recognised on the differences between the fair values of assets acquired and the future tax deductions available for them and the differences between the fair values of liabilities acquired and the amount that will be assessed for tax.
Deferred income tax is determined using tax rates and laws that have been enacted or substantively enacted by the reporting date.
Pension costs
Contributions to the group's defined contribution pension scheme were charged to profit or loss in the year in which they became payable. Members obtain a valuation of any surplus or deficit on the defined benefit sections under FRS 102 on a regular basis and recognise any change in the surplus or deficit based on their assessment of i) materiality and ii) likelihood of realisation or payment.
Finance costs
Finance costs were charged to profit or loss over the term of the debt using the effective interest rate method so that the amount charged was at a constant rate on the carrying amount. Issue costs were initially recognised as a reduction in the proceeds of the associated capital instrument.
Profit allocations
Profit allocations are recognised in the year in which they are declared and become a present obligation of the LLP. Salaried members' were remunerated through employment contracts with Rhealisation LLP and fixed share members were entitled to a pre-determined share of the profits plus a potential performance-related bonus element. All other members participate fully in the firm's profits, sharing the risks and rewards according to profit sharing ratios that are determined annually by an elected committee after careful consideration of a range of performance measures.
12
Rhealisation LLP
Notes forming part of the financial statements
for the year ended 30 April 2017 (continued)
1
Accounting policies (continued)
Drawings
Drawings represent payments on account of profits which may be allocated to members. The amount of such drawings is set at the beginning of each financial year, taking into account the anticipated cash needs of the LLP and may be reclaimed from members until profits have been allocated to them. Unallocated profits are included within members' other interests, classified as equity, advanced drawings in excess of allocated profits are included within 'Amounts due from members' in debtors, and allocated profits in excess of drawings are included within ‘Amounts due to members' as a liability.
Members' capital
Initial capital contributions (‘principal capital') of each of the members are amounts as set out in the LLP agreement. Further members shall contribute upon admission to the LLP such capital as determined by the Board.
No member can withdraw or receive back any part of their principal capital contribution account except for in specific circumstances as detailed in the LLP deed and approved by the Board. Members' principal capital is therefore classified as equity.
Holiday pay accrual
A liability was recognised to the extent of any unused holiday pay entitlement which had accrued at a reporting date and was carried forward to future periods. This was measured at the undiscounted salary cost of the future holiday entitlement so accrued at the balance sheet date.
Leased assets: Lessee
Where assets were financed by leasing agreements that gave rights approximating to ownership (finance leases), the assets were treated as if they had been purchased outright. The amount capitalised was the present value of the minimum lease payments payable over the term of the lease. The corresponding leasing commitments were shown as amounts payable to the lessor. Depreciation on the relevant assets was charged to profit or loss over the shorter of estimated useful economic life and the term of the lease.
Lease payments were analysed between capital and interest components so that the interest element of the payment was charged to profit or loss over the term of the lease and was calculated so that it represented a constant proportion of the balance of capital repayments outstanding. The capital part reduced the amounts payable to the lessor.
All other leases were treated as operating leases. Their annual rentals were charged to profit or loss on a straight-line basis over the term of the lease. On certain leased properties the business benefitted from a rent free period. These were treated as a reduction in the overall rental expense and the benefit spread on a straight line basis over the shorter of the lease term or the period until the rent was first adjusted to the prevailing market rate.
The group had taken advantage of the optional exemption available on transition to FRS 102 which allowed lease incentives on leases entered into before the date of transition to the standard (1 January 2014) to continue to be charged over the shorter period to the first market rent review rather than the term of lease.
For leases entered into on or after 1 January 2014, reverse premiums and similar incentives received to enter into operating lease agreements were released to profit or loss over the term of the lease.
Where the Group had a legal obligation, a dilapidations provision was created on inception of a lease. These provisions were a best estimate of the cost required to return leased properties to their original condition upon termination of the lease. Where the obligations arose from ‘wear and tear', the provision was accrued as the ‘wear and tear' occurred.
13
Rhealisation LLP
Notes forming part of the financial statements
for the year ended 30 April 2017 (continued)
1
Accounting policies (continued)
Onerous leases
Where the unavoidable costs of a lease exceeded the economic benefit expected to be received from it, a provision was made for the present value of the obligations under the lease.
Professional indemnity insurance
Insurance premiums are expensed to the profit and loss account over the period of the insurance cover. Provision is made for any uninsured excess that is likely to be payable in respect of claims made. These are based on best estimates of the expected cash outflows, discounted to present value where appropriate.
Provisions for Properties
Provisions for dilapidations and re-instatement in respect of leased property were made where required. These provisions were based on the terms of the individual lease agreements and, where relevant, independent reports.
Provision for litigation claims
Any claims notified to the firm are assessed on their merits and, where it is considered probable that costs will be incurred, a provision is recognised.
Turnover
Turnover represented fees and other income earned from the provision of services falling within the Group's ordinary activities and was stated net of value added tax. All income derived from activities within the United Kingdom.
Other operating income
Other operating income represents fees and other income earned from the provision of services falling outside of the Group's ordinary activities, such as fees charged for the provision of directors' services and office facilities, and is stated net of value added tax. All such income derives from activities within the United Kingdom.
Financial liabilities and equity
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.
14
Rhealisation LLP
Notes forming part of the financial statements
for the year ended 30 April 2017 (continued)
2
Judgements in applying accounting policies and key sources of estimation uncertainty
In preparing these financial statements, the members made the following judgements in respect to the comparative period:
Determine whether leases entered into by the group either as a lessor or a lessee were operating or finance leases. These decisions depended on an assessment of whether the risks and rewards of ownership had been transferred from the lessor to the lessee on a lease by lease basis.
Determine whether there were indicators of impairment of the group's tangible and intangible assets, including goodwill. Factors taken into consideration in reaching such a decision included the economic viability and expected future financial performance of the asset and where it was a component of a larger cash-generating unit, the viability and expected future performance of that unit.
Other key sources of estimation uncertainty
Tangible fixed assets (see note 9)
Tangible fixed assets were depreciated over their useful lives taking into account residual values, where appropriate. The actual lives of the assets and residual values were assessed annually and may have varied depending on a number of factors. In re-assessing asset lives, factors such as technological innovation, product life cycles and maintenance programmes were taken into account. Residual value assessments considered issues such as future market conditions, the remaining life of the asset and projected disposal values.
Investments (see notes 10 and 12)
The most critical estimates, assumptions and judgements relate to the determination of carrying value of unlisted investments at fair value through profit and loss. In determining this amount, the Group applies the overriding concept that fair value is the amount for which an asset can be exchanged between knowledgeable willing parties in an arm's length transaction. The nature, facts and circumstance of the investment drives the valuation methodology.
Listed investments are valued at the quoted bid price at the reporting date. Unquoted investments are valued using a price/earnings multiple methodology. The relevant price/earnings multiple is determined by reference to those applying to quoted companies in similar industries after adjustment for the reduced liquidity of unquoted companies. This multiple is then applied to the earnings of the investee company in the period, after adjustments for one-off unusual income or expenditure in the period.
15
Rhealisation LLP
Notes forming part of the financial statements
for the year ended 30 April 2017 (continued)
3
Operating profit
2017
2016
£
£
This is arrived at after charging/(crediting):
Depreciation and impairment of tangible fixed assets
1,112
401,370
(Profit)/Loss on disposal of fixed assets
(65,317)
(214,748)
Amortisation of intangible assets, including goodwill
-
(130,682)
Impairment of current asset investments
1,429
-
Fees payable to the LLP's auditor and its associates for the audit of the LLP's annual accounts
16,000
47,500
Fees payable to the LLP's auditor and its associates for other
services to the group:
-
123,493
The audit of the LLP's subsidiaries pursuant to legislation and
taxation compliance services
4,000
3,224
Operating lease payments - Premises
-
1,220,990
Operating lease payments – Plant & machinery
-
208,691
Defined contribution pension cost
-
332,530
_______
_______
4
Employees
2017
2016
£
£
Staff costs consist of:
Wages and salaries
-
9,008,372
Social security costs
-
857,554
Cost of defined contribution scheme (note 15)
-
246,750
_______
_______
-
10,112,676
_______
_______
The average number of employees during the year was as follows:
Number
Number
Client service staff
-
194
Support staff
-
146
_______
_______
-
340
_______
_______
The trade and assets of the LLP and the group were sold in December 2015 and the staff transferred under a TUPE agreement to the acquiring entity. Consequently, throughout the year end 30 April 2017 there were no staff employed by the LLP or the group.
16
Rhealisation LLP
Notes forming part of the financial statements
for the year ended 30 April 2017 (continued)
5
Members' remuneration
Profits are shared among the members in accordance with agreed profit sharing arrangements. Members are required to make their own provision for pensions from their profit shares.
2017
2016
Number
Number
Average number of members during the year
21
66
_______
_______
£
£
Profit attributable to the member with the largest entitlement
-
1,000,994
_______
_______
6
Interest payable and similar charges
2017
2016
£
£
Bank loans and overdrafts
-
76,864
Finance leases and hire purchase contracts
-
3,359
_______
_______
-
80,223
_______
_______
7
Interest receivable
2017
2016
£
£
Bank interest receivable
5,070
98,695
Other interest receivable
1,162
-
_______
_______
6,232
98,695
_______
_______
17
Rhealisation LLP
Notes forming part of the financial statements
for the year ended 30 April 2017 (continued)
8
Taxation on profit on ordinary activities
2017
2017
2016
2016
£
£
£
£
UK corporation tax
Current tax on profits of the year
-
125,824
Adjustment in respect of previous periods
(5,824)
2,847
Tax on discontinued operations
-
-
_______
_______
Total current tax
(5,824)
128,671
Deferred tax
Origination and reversal of timing differences
-
9,626
Changes to tax rates
-
-
_______
_______
-
9,626
_______
_______
Taxation on profit on ordinary activities
(5,824)
138,297
_______
_______
The tax assessed for the year is higher than the standard rate of corporation tax in the UK applied to profit before tax. The differences are explained below:
2017
2016
£
£
(as restated)
Profit / (loss) on ordinary activities before tax
(621,913)
19,582,549
Less: amounts subject to personal taxation
617,040
(19,078,543)
_______
_______
Profit / (loss) subject to taxation
(4,873)
504,006
_______
_______
Profits subject to taxation at the standard rate of
corporation tax in the UK of 19.92% (2016: 20%)
(971)
100,801
Effects of:
Expenses not deductible for tax purposes
-
34,649
Adjustment in respect of prior years
(5,824)
2,847
Losses carried forward
971
-
_______
_______
Total tax charge for period
(5,824)
138,297
_______
_______
No deferred tax asset has been recognised in respect to tax losses as it is uncertain that future taxable profits will be generated against which they would reverse.
18
Rhealisation LLP
Notes forming part of the financial statements
for the year ended 30 April 2017 (continued)
9
Tangible fixed assets
Group and LLP
Building
improvements
£
Cost or valuation
At 1 May 2016
22,221
Disposals
(22,221)
_______
At 30 April 2017
-
_______
Depreciation
At 1 May 2016
21,109
Disposals
(21,109)
_______
At 30 April 2017
-
_______
Net book value
At 30 April 2017
-
_______
At 30 April 2016
1,112
_______
19
Rhealisation LLP
Notes forming part of the financial statements
for the year ended 30 April 2017 (continued)
10
Fixed asset investments
Other
investments
Group
and loans
Total
£
£
Cost or valuation
At 1 May 2016
2,775,655
2,775,655
Additions
-
-
Disposals
(48,000)
(48,000)
_______
_______
At 30 April 2017
2,727,655
2,727,655
_______
_______
LLP
Shares in
Other
group
investments
undertakings
and loans
Total
£
£
£
Cost or valuation
At 1 May 2016 (as restated)
155,002
2,621,655
2,776,657
Additions
-
-
-
Disposals
-
(48,000)
(48,000)
_______
_______
_______
At 30 April 2017
155,002
2,573,655
2,728,657
_______
_______
_______
Other investments are shares in other unlisted companies which have been measured at fair value.
20
Rhealisation LLP
Notes forming part of the financial statements
for the year ended 30 April 2017 (continued)
10
Fixed asset investments (continued)
Subsidiary undertakings, associated undertakings and other investments
The LLP and the Group have investments in the following subsidiary undertakings and other investments. All businesses are incorporated in Great Britain and registered in England and Wales.
Proportion of
voting rights
and ordinary
Name
share capital held
Nature of business
Subsidiary undertakings
Rhealisation Enterprises Limited
Ordinary
100%
Dormant company
Redeemable
100%
Rhealisation Services Limited
Ordinary
100%
Non-trading Company
Rhealisation Two Limited
Ordinary
100%
Dormant Company
Rhealisation Nominees Limited
Ordinary
100%
Dormant Company
Other Investments
Thesis Asset Management plc
Ordinary (voting)
Investment Management
100%
'A' Ordinary (non-voting)
100%
'B' Ordinary (non-voting)
100%
Rhealisation Two Limited and Rhealisation Nominees Limited were both dormant companies at 30 April 2016 and 30 April 2017 and have been excluded from the consolidation as they are immaterial to the results of the Group.
All investments are held directly by Rhealisation LLP, except as noted below.
The Ordinary shares of Thesis Asset Management plc, which confer voting rights on the holders, are held in a discretionary trust. The beneficiaries of that trust comprise current members of Rhealisation LLP plus a number of former members of the LLP or its predecessor unincorporated partnership. Two current members of the LLP serve as directors of Thesis Asset Management plc. The level of control exercised over Thesis Asset Management plc by the LLP does not satisfy the requirements of FRS102 for the business to be treated as a subsidiary undertaking.
The ‘B' Ordinary shares in Thesis Asset Management plc were held by Rhealisation Enterprises Limited throughout the year.
The group and LLP disposed of their investment in Meridies Limited, a company registered in the Isle of Man, with the first instalment payment serving as partial consideration for liabilities within its PII provision.
Since the reporting date the LLP and the group have sold their investments in the shares of Thesis Asset Management plc.
21
Rhealisation LLP
Notes forming part of the financial statements
for the year ended 30 April 2017 (continued)
11
Debtors
Group
Group
LLP
LLP
2017
2016
2017
2016
£
£
£
£
Other debtors including deferred tax
2,611,070
6,538,985
2,631,455
6,531,160
Prepayments
8,043
180,610
8,043
180,610
_______
_______
_______
_______
2,619,113
6,719,595
2,639,498
6,711,770
_______
_______
_______
_______
All amounts shown under debtors fall due for payment within one year.
12
Current asset investments
Group and LLP
2017
2016
Listed Securities - UK
£
£
Opening fair value
1,429
8,571
Gains/(losses) on remeasurement to fair value
-
(7,142)
Impairment recognised on the investment
(1,429)
-
_______
_______
Market value
-
1,429
_______
_______
All current asset investments are shares held in listed companies which are traded on a regular basis. The total income recognised on these investments in the period was £nil (2016: £nil) representing the fair value remeasurements shown above and dividends received of £nil (2016: £nil). Due to the low value of the investments and previous issues when attempting a sale, the members have recognised a full impairment, considering that the costs of selling the assets would eliminate any proceeds on the sale.
22
Rhealisation LLP
Notes forming part of the financial statements
for the year ended 30 April 2017 (continued)
13
Creditors: amounts falling due within one year
Group
Group
LLP
LLP
2017
2016
2017
2016
£
£
£
£
(as restated)
Taxation and social security
-
378,510
-
378,510
Other creditors
-
27,703
-
17,320
Accruals and deferred income
29,000
90,024
23,002
80,024
_______
_______
_______
_______
29,000
496,237
23,002
475,854
_______
_______
_______
_______
14
Provisions for liabilities
PII
Group & LLP
provision
Total
£
£
At 1 May 2016
233,516
233,516
Amounts paid during the year
(69,382)
(69,382)
Settled through surrender of Meridies investment
(56,659)
(56,659)
Additional provision relating to previous trade
332,525
332,525
_______
_______
At 30 April 2017
440,000
440,000
_______
_______
In common with comparable businesses, the Group was involved in a number of disputes in the ordinary course of its former business, which may give rise to claims. The Group carries professional indemnity insurance (PII) and where a claim is agreed with the insurance company on notification, the liability for the claim amount above the excess is taken on by the insurance firm. No separate disclosure is made of the cost of claims covered by insurance as to do so could seriously prejudice the position of the Group.
23
Rhealisation LLP
Notes forming part of the financial statements
for the year ended 30 April 2017 (continued)
15
Pensions
The group operates a number of defined contribution schemes for which the pension cost charge for the year amounted to £nil (2016: £332,530). The pension cost charge for the year excluding salaried members amounted to £nil (2016: £246,750).
As at 30 April 2017 there were no contributions outstanding (2016: £nil).
16
Deferred taxation
Deferred tax assets – Group
The total potential amount of deferred tax on timing differences and the amount for which an asset at 19.92% (2016: 20%) has been recognised is:
2017
2016
Deferred tax asset
£
£
Balance as at 1 May 2016
-
9,626
Charge to income statement
-
(9,626)
_______
_______
Balance as at 30 April 2017
-
-
_______
_______
As disclosed within note 8, the group has unused tax losses of £5,824 (2016 - £nil) upon which no deferred tax asset has been recognised.
17
Contingent liabilities
Group
SIMIA (the Solicitors Indemnity Mutual Insurance Association) a mutual insurance company who sold professional indemnity insurance of above 1 million to firms of solicitors has for the last few years been in the process of runoff. Rhealisation LLP had been notified of potential exposures to uncovered claims amounting to £746,543. During the course the accounting year 16/17, a call for a contribution of £17,326.07 was made by SIMIA and duly paid in October 2016. That contribution allowed SIMIA to meet its solvency to benchmark. It also allowed it to remain sufficiently solvent to arrange for the sale of its runoff book. A sale was approved by the Members at a meeting on the 15th May 2017. That sale requires approval by the regulatory authorities. That approval has not yet been provided. The sale of the runoff book will mean that there will be no contingent liability in the future and indeed there is the possibility of a refund of part of the recent contribution call.
The LLP has guaranteed the obligation to Cheviot Trust. Actuaries retained by the LLP have assessed the value of that contingent liability at between zero and £400,000. The members of the LLP have resolved to retain £400,000 in cash deposits as a reserve against this contingent liability. The LLP will review this reserve from year to year.
The previous partnership (Thomas Eggar) provided a pension scheme to staff through the Cheviot Pension Scheme, a defined contribution scheme that is closed to new members, and which includes certain guaranteed rates of return on one section of the scheme which the Group and LLP guaranteed.
A valuation under Financial Reporting Standard 102 performed as at 31 December 2016 shows that on a scheme funding basis the assets of the scheme are sufficient to cover all (2016: 102%) of the relevant liabilities. On an estimated buyout basis the LLP's share of the deficit has been calculated as £239,544. The financial statements record neither an asset nor a liability in relation to the scheme either in the current or comparative periods.
24
Rhealisation LLP
Notes forming part of the financial statements
for the year ended 30 April 2017 (continued)
18
Members' Interests
Group
EQUITY
DEBT
Loans and other debts due to
members less any amounts
due from members in debtors
Members' other interests
Total
members'
interest
Members'
Members'
capital
capital
classified
classified
Other
as a
Other
as equity
reserves
Total
liability
amounts
Total
Total
£
£
£
£
£
£
£
Amounts due to members
-
773
773
11,408,810
-
11,408,810
11,409,583
Amounts due from members
-
-
-
-
-
-
-
_______
_______
_______
_______
_______
_______
_______
Balance at 1 May 2016
-
773
773
11,408,810
-
11,408,810
11,409,583
Members' remuneration charged as an expense
-
951
951
(617,040)
-
(617,040)
(616,089)
Profit for the financial year available for discretionary division among members
-
-
-
-
-
-
-
_______
_______
_______
_______
_______
_______
_______
Members' interests after profit for the year
-
1,724
1,724
10,791,770
-
10,791,770
10,793,494
Allocation of profit
-
-
-
-
-
-
-
Introduction by members
-
-
-
-
-
-
-
Repayment of capital
-
-
-
-
-
-
-
Drawings
-
-
-
(5,213,696)
-
(5,213,696)
(5,213,696)
Repayment of loan
-
-
-
-
-
-
-
Currency translation differences
-
-
-
-
-
-
-
Transfer to creditors
-
-
-
-
-
-
-
_______
_______
______
_______
_______
_______
_______
Amounts due to members
-
1,724
1,724
5,578,074
-
5,578,074
5,579,798
Amounts due from members
-
-
-
-
-
-
-
_______
_______
_______
_______
_______
_______
_______
Balance at 30 April 2017
-
1,724
1,724
5,578,074
-
5,578,074
5,579,798
_______
_______
_______
_______
_______
_______
_______
Total members' interest, including loans and other debts due to members, are unsecured and would rank pari passu with other unsecured creditors in the event of a winding up.
Loans and other debts due to members are due within one year. Members' capital is repaid to retiring members at the same value at which they contributed it.
25
Rhealisation LLP
Notes forming part of the financial statements
for the year ended 30 April 2017 (continued)
19
Members' Interests (continued)
LLP
EQUITY
DEBT
Loans and other debts due to
members less any amounts
due from members in debtors
Members' other interests
Total
members'
interest
Members'
Members'
capital
capital
classified
classified
Other
as a
Other
as equity
reserves
Total
liability
amounts
Total
Total
£
£
£
£
£
£
£
Amounts due to members
-
-
-
11,408,810
-
11,408,810
11,408,810
Amounts due from members
-
-
-
-
-
-
-
_______
_______
_______
_______
_______
_______
_______
Balance at 1 May 2016
-
-
-
11,408,810
-
11,408,810
11,408,810
Members' remuneration charged as an expense
-
-
-
(617,040)
-
(617,040)
(617,040)
Profit for the financial year available for discretionary division among members
-
-
-
-
-
-
-
_______
_______
_______
_______
_______
_______
_______
Members' interests after profit for the year
-
-
-
10,791,770
-
10,791,770
10,791,770
Allocation of profit
-
-
-
-
-
-
-
Introduction by members
-
-
-
-
-
-
-
Repayment of capital
-
-
-
-
-
-
-
Drawings
-
-
-
(5,213,696)
-
(5,213,696)
(5,213,696)
Repayment of loan
-
-
-
-
-
-
-
_______
_______
_______
_______
_______
_______
_______
Amounts due to members
-
-
-
5,578,074
-
5,578,074
5,578,074
Amounts due from members
-
-
-
-
-
-
-
_______
_______
_______
_______
_______
_______
_______
Balance at 30 April 2017
-
-
-
5,578,074
-
5,578,074
5,578,074
_______
_______
_______
_______
_______
_______
_______
Total members' interest, including loans and other debts due to members, are unsecured and would rank pari passu with other unsecured creditors in the event of a winding up
Loans and other debts due to members are due within one year. Members' capital is repaid to retiring members at the same value at which they contributed it.
.
26
Rhealisation LLP
Notes forming part of the financial statements
for the year ended 30 April 2017 (continued)
20
Financial Instruments
The Group's financial instruments may be analysed as follows:
Group
Group
LLP
LLP
2017
2016
2017
2016
£
£
£
£
(as restated)
Financial assets
Financial assets that are debt instruments
3,313,100
9,180,530
3,304,376
9,158,372
measured at amortised cost
_______
_______
_______
_______
Financial liabilities
Financial assets that are debt instruments
29,000
117,727
23,002
97,344
_______
_______
_______
_______
Financial assets measured at amortised cost comprise cash, trade debtors, other debtors, amounts owed by group undertakings.
Financial liabilities measured at amortised cost comprise other creditors and accruals.
21
Discontinued operations
On 17 December 2015 the group disposed of the trading assets & liabilities of Rhealisation Group. The group recognised a profit on disposal of £12,686,679 in respect to this deal being the net of the cash proceeds and the net liabilities disposed.
However, elements of the cash proceeds were to be paid in tranches subject to earn out clauses and other considerations. Due to the assumption, by the acquiring party, of additional liabilities not previously recognised, a reduction in the proceeds is under discussion. The expected reduction in the proceeds is shown as a charge within the profit or loss for the year ended 30 April 2017.
22
Prior year adjustment
In the preparation of the financial statements for the year ended 30 April 2017, the members identified the following misstatements within the balances for the comparative year (all adjustments were in respect to the discontinued operations):
As previously reported
Adjustment
As restated
£
£
£
Turnover
16,667,809
6,995,313
23,663,122
Administrative expenses
(18,182,447)
468,841
(17,713,606)
Profit on disposal of operations
14,336,883
(1,650,204)
12,686,679
Other operating income
791,014
-
791,014
___________
___________
___________
Group operating profit
13,613,259
5,813,950
19,427,209
The effect of the above adjustments was that the 2016 profits before Members' remuneration and profit shares increased by £5,813,950 from that previously reported for both the LLP and the consolidated income statements.
In addition, in the consolidated statement of cash flows the amount shown for Members' drawings in relation to remuneration has been adjusted from £6,388,879 to £12,202,829.
27
Rhealisation LLP
Notes forming part of the financial statements
for the year ended 30 April 2017 (continued)
22
Prior year adjustment (continued)
The reported positions of the April 2016 balance sheets were unaffected by the above adjustments.
A separate, balance sheet only, adjustment in relation to the disposal of a non-trading subsidiary was also recorded in respect of the LLP (there was no impact on the consolidated balance sheet):
As previously reported
Adjustment
As restated
£
£
£
Investments (shares in group undertakings)
2,872,657
(96,000)
2,776,657
Creditors due within one year (other creditors)
(571,854)
96,000
(475,854)
23
Related party disclosures
There is no ultimate controlling party of Rhealisation LLP.
During the comparative year the LLP transacted with Thesis Asset Management Plc (“TAM”) and Thesis Unit Trust Management Limited (“TUTMAN”), companies in which the LLP had an interest (see note 10). Law South is a grouping of firms of solicitors that provide a variety of centralised services, such as training, for its members (V C Brackett is a Director). The results of which are included in the Group accounts, as follows:
2017
2016
£
£
Sales to TAM
-
80,355
Sales to TUTMAN
-
72,703
Sales to Dekra
-
539,663
Purchases from TAM
-
(14,413)
Purchases from Law South
-
(75,384)
Purchases from Dekra
-
(7,541)
Purchases from Meridies
(108,715)
(280,667)
Key management personnel compensation
-
2,737,790
As disclosed within note 10, the Group and LLP redeemed its investment in the share capital of Meridies Limited for a sum of £113,317. At the reporting date the second payment of £56,659 remained outstanding and is included within other debtors.
All related party transactions for the Group and LLP were carried out on an arm's length basis.
24
Commitments under operating leases
The group and LLP had minimum lease payments under non-cancellable operating leases as set out below:
2017
2016
Land and
Land and
buildings
buildings
£
£
Expiry date:
Within one year
-
58,751
_______
_______
-
58,751
_______
_______
28
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