4Forensics regularly carry out investigations and provide advice for parties in divorce proceedings, usually when one of the spouses has ownership of a business or runs a number of businesses.

The nature of this work often involves the provision of a business valuation but can also lead to deeper investigative work or even restructuring advice.

On a number of occasions we have been requested to review the financial records of the  business of one of the spouses, where there is a suspicion that business performance has been manipulated to reduce assets and settlement.

Occasionally the scope is wider and incorporates the provision of advice as to how a settlement of business assets can be achieved tax efficiently.

The client, a non-working director and minor shareholder in her husband’s engineering company, was exploring the financial aspects of divorce. She had not yet agreed with her husband as to whether they would be separating and therefore had not entered into legal divorce proceedings. However she wanted to know what financial package could be amicably agreed with her husband, whose health was deteriorating, so that when they did separate in the probable near future, the monetary aspects were taken care of and could be shown to have been agreed when the husband was compos mentis.

Our team was asked to provide the framework for the above advice, by undertaking a valuation of the engineering business and investigating why profits had deteriorated in the most recent year of account.

The client owned 40% of the shares of an established profitable care home. The other shares were held by her ex-spouse and sons. The ex-spouse also owned 60% of a second newly constructed care home, the balance of shares being held by the son, and 100% of a third smaller care home.

After undertaking a valuation of each business our experts were requested to produce a number of tax efficient options whereby the client and her ex-spouse could swap/buy each others' shares with the aim that neither held shares in the same business and therefore a clean break could be achieved.

After discussing the requirements of both parties and obtaining an understanding of their financial and taxation positions our experts were able to suggest three key alternative courses of action, the tax effect on each party, and suggest the likely methods by which the alternatives could be funded.

In this matter the husband ran a profitable business which supplied building materials to trade customers. In the year following separation the performance of the business was considerably deflated in terms of sales and profits, which the husband attributed to the distraction of the separation and child access issues.

The wife had a suspicion that sales were being diverted to other businesses, controlled by contacts of the husband.

Our team were instructed to review lost sales, the pattern of sales and the customers involved to assess whether there were valid reasons for the decline in trading with that customer.

Expert accounting, computer and interrogative skills were required. The report identified that there were valid reasons why sales had decreased with key customers, which was partly due to recessionary or other economic reasons. The wife understood and accepted the findings.