Retail & Hospitality

Debt restructuring for a restaurant group

A UK-headquartered, international restaurant group had been funded by interest-bearing loans from its offshore parent company.

Debt was loaned down to the group’s US subgroup to help fund expansion. Interest accrued on the loans but was not paid, so that the US subgroup could preserve as much cash as possible to fund further expansion.

The interest income recognised in the UK was taxable as it accrued. However, the UK and US companies were both subject to rules that denied a corporation tax deduction for the interest until it was paid. This resulted in a significant annual tax charge in the UK company.

There was also a potential risk that US withholding tax could apply, without relief, on future interest payments made from the US subgroup, by virtue of “limitation of benefits” provisions in the UK-US double tax treaty.

Working with US advisers, we designed a sequence of steps to restructure the intercompany financing arrangements, both from the offshore parent to the UK company and from the UK company to the US subgroup, in order to ensure that there was no ongoing tax leakage and to optimise the future withholding tax position. Over time, this saved the group hundreds of thousands of pounds of tax.

Flexible and scalable advice for a restaurant start-up

Clare Smyth is a chef who, throughout her career, has worked in many high profile restaurants

This included being the head chef at Restaurant Gordon Ramsay, which made her the first female chef in the UK to run a three Michelin star restaurant. In August 2017 she opened her own restaurant, Core, in Notting Hill which was awarded two Michelin stars in the 2019 guide and three stars in 2021.

Clare needed expert accountancy advice to support her throughout the process of setting up her business. Being a start-up, she needed a flexible and scalable provider who could be available whenever needed and have the breadth of expertise to deal with all queries relating to establishing and running a business. Clare was also looking for a provider with experience not only of helping entrepreneurial businesses, but of working within the hospitality sector as well.

We have become an extension of Core’s team and remain on hand to answer any queries, drawing on our experts across the business where needed. Having this level of expertise all in one place, with a dedicated team available to them at any time, gives the management team the reassurance needed to concentrate on the day-to-day running of the business.