A Look at Formsole

During last Thursday evening's Fans forum, Hereford United chairman David Keyte spoke about his discussions with the Richardson Brothers about the leases at Edgar Street.

It appears to be his aim to try and do a deal with them so they would 'sell' their interest in the Edgar Street leases and the debt back to the club. If this happened it would be much easier to plan for the future.

In essence a company called Formsole leases Edgar Street from Herefordshire Council. Formsole is jointly owned by the Richardson Brothers and Carillion.

Below is an article originally published on www.hu-fc.co.uk in January 2004 which looked at Formsole.

Recent changes in the ownership of Formsole, the company who have "loaned" Hereford United £1 million pounds, means that the club are now dealing with two West Midlands based companies, Carillion and Richardsons.

And it is now easier to see what has recently been going on as regards the loans.

Originally two companies made money available to Hereford United. One was the BS group and the other Formsole which was a Chelverton company. After a couple of years the BS Group decided to sell their "loan" to Chelverton at an amount just over book value. Book value often means less than true value so this could suggest than Chelverton took over the BS share for less than the £500,000 loaned to the club.

Later when part of the Chelverton Group got into trouble it is feasible that the current owners of Formsole bought the Chelverton stake for next to nothing from the liquidators. So it is quite likely that Formsole, now owned by Carillion and Richardson, would not be exposed to anything like a million pound debt from Hereford.

On top of that Formsole have used a tax rule to "obtain" a tax credit from the loans of about £355,544 from the Inland Revenue.

Therefore it is possible that the companies owners may have managed to "get back" quite a good percentage of the £1 million loans.

It is not easy to follow the fortunes of the Formsole company. Even if one had the time to delve into all the information available it would be difficult to find all the facts required. But certain notes do suggest that Formsole have decided to take this tax credit because they are uncertain about the likelyhood of the loan ever being paid back.

In the Formsole accounts for the year ending March 2001 it says: "The directors beleive the amounts to be fully recoverable" meaning the £1 million loans.

But in the accounts for the year to March 2003 recently released it states: "The directors believe it is prudent to provide for the loans given the uncertainty regarding their recoverability".

The difference in the two statements is very clear. In 2001 they thought the club would agree to a move from Edgar Street which would have allowed Formsole to sell the ground for developement but by 2003 the new directors appear to have taken the view that there is unlikely to be a move from Edgar Street hence the thought that they are unlikely to be repaid for some years whatever happens to the plans for the area.

The tax credit of £355,544 was obtained by changing the loans to administrative expenses which are claimable against tax. The accounts clearly show what has happened. In one set of accounts the administrative expenses are shown as £1,250 and in other they are shown as £1,189,315.

There is a note which says: "Administrative expenses included a charge of £1,000,000 for the Hereford United loans."

The fact that Formsole have claimed back tax on the loan does not, in theory, mean that they could not ask Hereford United for the loan to be repaid but it looks that much less likely as they do not even put the loan in their recent Debtors column which they had done previously.

Little appears to have changed since that article.

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