RIX_&_KAY_SOLICITORS_LLP - Accounts

The members of the limited liability partnership have elected not to include a copy of the income statement within the financial statements.

These financial statements have been prepared and delivered in accordance with the provisions applicable to limited liability partnerships subject to the small limited liability partnerships regime.

Rix & Kay Solicitors LLP ("the LLP") is a firm of solicitors providing legal services.

The LLP is a limited liability partnership incorporated and domiciled in England and Wales. The registered office is The Courtyard, River Way, Uckfield, East Sussex, TN22 1SL.

Statement of compliance

These financial statements have been prepared in accordance with the Statement of Recommended Practice "Accounting by Limited Liability Partnerships" issued in January 2017, together with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006 as applicable to companies subject to the small companies regime. The disclosure requirements of section 1A of FRS 102 have been applied other than where additional disclosure is required to show a true and fair view.

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

Basis of Preparation

These financial statements are prepared on a going concern basis, under the historical cost convention, as modified by the revaluation of land and buildings and to include investment properties and certain financial assets and liabilities measured at fair value through profit or loss.

The preparation of financial statements in conformity with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise its judgements in the process of applying the LLP's accounting policies.

The LLP meets its day-to-day working capital requirements through bank overdraft and loan facilities. The LLP's forecasts and projections, taking account of reasonable possible changes in trading performance, show that the LLP should be able to operate within the level of its current facilities. After making enquiries, the members have a reasonable expectation that the LLP has adequate resources to continue in operational existence for the foreseeable future.

The members have considered the consequences of COVID-19 and other events and conditions, and they have determined that they do not create a material uncertainty that cast significant doubt upon the LLP's ability to continue as a going concern.

In response to these consequences the members have utilised the support of the government schemes such as the Coronavirus Job Retention Scheme and government backed loans. As a result the members have not seen a reduction in available funding and are confident that the company will not have liquidity issues in the foreseeable future.

The members are unable to predict how the virus will progress nor the future actions of the government to contain the virus and the possible economic consequence of such measures on the LLP.

The members have determined that, as of the date of the approval of these financial statements, that the actions taken by them are sufficient to mitigate the uncertainties and have therefore prepared the financial statements on a going concern basis.

Revenue is measured at the fair value of the consideration received or receivable and represents amounts chargeable to clients for professional services provided during the year net of discounts and value added taxes. Revenue is recognised on an individual engagement basis when the amount can be reliably measured and it is probable that the consideration is recoverable.

When the outcome cannot be reliably estimated, revenue is recognised only to the extent of the costs recognised that are recoverable. The cost recognised includes staff salary costs and costs reimbursable to clients together with an appropriate proportion of overheads based on normal activity levels but excludes any valuation of members' time.

Unbilled revenue on individual client assignments is included in amounts recoverable on contracts within trade and other receivables.

Revenue in respect of contingent fee assignments (over and above any agreed minimum fee) is only recognised when the contingent event occurs and collectability of the fee is probable.

Costs in respect of contingent fee engagements are written off to the income statement as incurred until the contingent event occurs and recovery of the fee is probable. However, where there is a minimum fee, the lower of the expense recognised and the minimum fee is included in amounts recoverable on contracts.

Tangible assets are stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes the original purchase price, costs directly attributable to bringing the asset to its working condition for its intended use, dismantling and restoration costs and borrowing costs capitalised.

Depreciation and residual values

Land is not depreciated. Depreciation on other assets is provided at rates calculated to write off the cost less estimated residual value of each asset over its expected useful life, as per the following table.

The assets' residual values and useful lives are reviewed, and adjusted, if appropriate, at the end of each reporting period. The effect of any change is accounted for prospectively.

Derecognition

Tangible assets are derecognised on disposal or when no future economic benefits are expected. On disposal, the difference between the net disposal proceeds and the carrying amount is recognised in the Statement of Comprehensive Income and included in 'Operating profit'.

Interests in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.

Investments in unquoted equity instruments are measured at fair value. Changes in fair value are recognised in the income statement. Fair value is estimated by using a valuation technique.

At each reporting period end date, the LLP reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the LLP estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

The LLP has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ to its financial instruments.

Basic financial instruments are recognised in the LLP's statement of financial position when the LLP becomes party to the contractual provisions of the instrument.

Basic financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets, which include trade and other receivables and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.

Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in the statement of comprehensive income.

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the LLP transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.

Basic 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 LLP after deducting all of its liabilities.

Basic financial liabilities, including other creditors and borrowings, bank loans and overdrafts that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future receipts discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade payables are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

The LLP does not have 'Other Financial Assets' and 'Other Financial Liabilities'.

Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.

Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.

Financial liabilities are derecognised when the LLP’s obligations expire or are discharged or cancelled.

Provisions are recognised when the limited liability partnership has a legal or constructive present obligation as a result of a past event, it is probable that the limited liability partnership will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting end date, taking into account the risks and uncertainties surrounding the obligation. Where the effect of the time value of money is material, the amount expected to be required to settle the obligation is recognised at present value. When a provision is measured at present value, the unwinding of the discount is recognised as a finance cost in profit or loss in the period in which it arises.

The LLP provides a range of benefits to employees, including annual bonus arrangements, paid holiday arrangements and defined contribution pension plans.

(i) Short term benefits

Short term benefits, including holiday pay and other similar non-monetary benefits, are recognised as an expense in the period in which the service is received.

(ii) Defined contribution pension plans

The LLP operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the LLP pays fixed contributions into a separate entity. Once the contributions have been paid the LLP has no further payment obligations. The contributions are recognised as an expense when they are due. Amounts not paid are shown in accruals in the balance sheet. The assets of the plan are held separately from the LLP in independently administered funds.

A provision in respect of annuities is recognised when the member obtains a right to the annuity, which the LLP has no discretion to withhold. The value of the provision is based on the best estimate of the current value of future cash flows. The provision is recalculated at each reporting date to take account of changes in membership, eligibility for post-retirement payments and financial estimates.

Amounts recognised in respect of current members are charged to the Statement of Comprehensive Income within 'Members' remuneration charged as an expense' and charges in respect of former members are expensed in 'Administrative expenses'.

The provision for post-retirement payments to, or in respect of current members, is shown as a component of 'Loans and other debts due to members' and in respect of former members is shown in 'Provisions for liabilities' or 'Liabilities' as appropriate.

In the year in which a member retires, a transfer is made between the balance in respect of current members and the balance in respect of former members.

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.

Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the statement of financial position as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Rentals payable under operating leases, including any lease incentives received, are charged to income on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the lease asset are consumed.

The financial statements are presented in the currency of the primary economic environment in which the LLP operates (its functional currency). For the purpose of the financial statements, the results and financial position are presented in pound sterling (£).

Income tax payable on the LLP's profits is the personal liability of the individual members and is not provided for in these financial statements. A retention is made from members' profits to fund payments of such tax and these retentions are contained within their undrawn profits balance and are reflected in "Loans and other debts due to members" within members' interests.

The average number of persons (excluding members) employed by the LLP during the year was 100 (2019 - 100).

The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts. The depreciation charge in respect of such assets amounted to £16,871 (2019 - £-) for the year.

Freehold land and buildings with a carrying amount of £1,009,261 (2019 - £1,020,492) have been pledged as security for the LLP's bank loans.

Shares in group undertakings, in two dormant subsidiaries, are held at cost. Other investments are minority shares held in unquoted equity instruments, there is no available information for the fair value of this holding to be determined and therefore held at costs less impairments.

Other borrowings represent amounts due to former members in respect of their prior loans and capital and Other payables represent annuity payments to former members all repayable by instalments over a period of five years.

Other borrowings represent amounts due to former members in respect of their prior loans and capital and Other payables represent annuity payments to former members all repayable by instalments over a period of five years.

The bank loans and overdrafts are secured against the assets of the LLP. They represent amounts due to members of The Royal Bank of Scotland Group totalling £851,958 (2019: £561,662)

The bank loans are repayable by instalments with remaining terms ranging from 1 year to 6 years at both fixed and variable interest rates ranging from 1.5% to 2.5% over base/libor rate respectively.

Finance lease payments represent rentals payable by the LLP for certain items of plant and machinery. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. The average lease term is 3-4 years. All leases are on a fixed repayment basis and although one arrangement has an agreement for contingent rental payments starting in December 2023 it is expected that the LLP will opt to purchase.

The brought forward provision for dilapidations is in respect of property leases which contained a requirement for the premises to be returned to its original state prior to the conclusion of the lease term. The amount was determined by reference to local builders' estimates for the work to be undertaken and was expected to be paid within 12 months. Of the amounts utilised in the year, £16,511 is carried forward as a liability within Accruals.

The provision against known professional indemnity obligations results from a small number of historical claims which are likely to crystallise. The amount is determined by our best estimate of the expected outflows and timing. There is uncertainty as to when matters will settle and we are guided by the insurers as to the quantum to be provided for on each claim.

The LLP operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the LLP in an independently administered fund.

The charge to profit and loss in respect of defined contribution schemes was £234,749 (2019 - £151,125).

The LLP operated a pension scheme with The Cheviot Trust in the past. The value of the scheme relating to the LLP at the year end, as estimated by the actuaries for The Cheviot Trust on a central basis, is as below. Balances and transactions relating to the scheme are not reflected in the accounts.

Cost of the firm’s share of benefits - £19,215

Surplus/(deficit) - (£441)

In the event of a winding up, £345,000 of the Amounts due to members, included in 'Loans and other debts due to members', are secured by debentures and will rank ahead of unsecured creditors. The balance of loans and other amounts owed to members in respect of profits will rank equally with unsecured creditors. Members can only reduce 'Members' other interests' by equal reductions over 5 years or by agreement of the Strategic Board.

As the income statement has been omitted from the filing copy of the financial statements, the following information in relation to the audit report on the statutory financial statements is provided in accordance with s444(5B) of the Companies Act 2006:

The auditor's report was unqualified.

Contingent liability - Professional indemnity obligations

There are some historic claims which may result in professional indemnity obligations. There is uncertainty as to whether the matters will result in liability and where this is the case no provision has been made; those which are considered probable have been provided for and details of which can be found in note 10. We are guided by the insurers as to the quantum to be provided for on each claim and the possible additional exposure over provisions at the year end is £112k.

Contingent liability - Other post-retirement payments to members

The members' agreement creates an obligation for the LLP to pay an annuity to some members on leaving the LLP. In particular, those who leave on or after reaching retirement age. Once a member reaches retirement age an obligation arises although any outflow is delayed until after the member leaves and then over a five year period. There are currently five members all with a possibility of receiving £50k from the LLP which would impact 'Members remuneration charged as an expenses' and 'Loans and other debts due'. Since the year end, one of the members has passed retirement age. No provision has been included in these financial statements on the basis that no obligation existed at the reporting date. There is further uncertainty as to whether a liability will arise on the other partners who only reach retirement age between 2022 and 2030.

Guarantee - Members capital

At the year end, two members, who are also considered to be related parties, owe £139k in total to Barclays Bank plc as part of their loans which were obtained to assist with the member's capital subscription to the LLP. The LLP has separately entered into an undertaking with the bank to guarantee that when the member becomes an outgoing member, the balance on the loan will be paid to the bank in advance of any residue of capital to the member in line with the members' agreement. Should the loan be defaulted, the LLP would be required to make an immediate payment.

At the reporting end date the LLP had outstanding annual commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

The COVID-19 pandemic developed rapidly in 2020. Measures taken by the government to contain the virus has affected economic activity. We have taken a number of measures to monitor and mitigate the effect of COVID-19, such as safety and health measures for our people and clients.

COVID-19 has not had, nor is expected to have a significant impact on the entity. We have determined that there is no material uncertainty that casts doubt on the LLP's ability to continue. We expect that COVID-19 might have some impact, though not significant, for example, in relation to expected future performance, or the effects on some future asset valuations. Further to this we have been supported by the various government schemes and have obtained loan finance were appropriate. Up to the date of the approval of these financial statements in 2020 we have not identified any significant impact on the fair value of assets.

We will continue to follow the various government policies and advice and, in parallel, we will do our utmost to continue our operations in the best and safest way possible without jeopardising the health of our people and clients.

We also refer to our note on going concern in the accounting policies.

The Strategic Board represents key management personnel for the purposes of these financial statements and the average number of members on the board is 4 (2019: 4).

There is no ultimate controlling party of Rix & Kay Solicitors LLP.