Company registration number SC373408 (Scotland)
TAYCARE HEALTH LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
TAYCARE HEALTH LIMITED
COMPANY INFORMATION
Directors
JS Gordon
SJJ Lyall
V Cockburn
J Band
(Appointed 1 April 2022)
Secretary
Resolis Limited
Company number
SC373408
Registered office
Exchange Tower
11th Floor
19 Canning Street
Edinburgh
Scotland
EH3 8EG
Auditor
Johnston Carmichael LLP
7-11 Melville Street
Edinburgh
Scotland
EH3 7PE
Bankers
The Cooperative Bank
PO Box 101
1 Balloon Street
Manchester
M60 4EP
TAYCARE HEALTH LIMITED
CONTENTS
Page
Directors' report
1 - 2
Directors' responsibilities statement
3
Independent auditor's report
4 - 7
Statement of comprehensive income
8
Statement of financial position
9
Statement of changes in equity
10
Notes to the financial statements
11 - 23
TAYCARE HEALTH LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 MARCH 2023
- 1 -

The directors present their annual report and financial statements for the year ended 31 March 2023.

Principal activities

The principal activities of the Company are the financing, design, construction of and provision of certain services in connection with the Taycare Mental Health Developments Project through an agreement with Tayside Health Board (Legal Organisation). The agreement was entered into under the Scottish Government's non-profit distributing PPP scheme.

 

Business Review

Taycare Health Limited is a special purpose company which has entered into a 30 year contract with Tayside Health Board to finance, design, construct and maintain the Mental Health Facilities at Murray Royal Hospital and Stracathro. Stracathro and Murray Royal Hospital Main Phase has reached the operational phase and therefore service income is now being received for this site.

 

The profit for the year is set out in the Statement of Comprehensive Income on page 8. The profit for the year after providing for taxation is £294,000 (2022: £518,000). As per the provisions of the Funding Agreements, the Shareholders Agreement and the Articles of Association, the full amount of the Company’s profits available for distribution are donated by the Company to Tayside Health Board over the life of the project.

 

Going concern

The directors acknowledge that the Company is in net liabilities. However, this is a result of the interest and RPI swaps which are significantly out of the money, being brought onto the Statement of Financial Position. After reviewing the Company’s forecasts and projections, the directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. The Company therefore continues to adopt the going concern basis in preparing its financial statements.

 

Dividend
The directors do not recommend the payment of a dividend (2022: £nil).
Directors

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

JS Gordon
SJJ Lyall
SJ Kelly
(Resigned 1 April 2022)
R Burge
(Resigned 25 May 2023)
V Cockburn
J Band
(Appointed 1 April 2022)
TAYCARE HEALTH LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
- 2 -
Financial instruments

Due to the nature of the Company’s business, the financial risks the directors consider relevant to the Company are credit, interest rate, cash flow and liquidity risk. The credit risk is considered low as the Company contracts with NHS Tayside, a public body.

Interest rate risk

The financial risk management objectives of the Company are to ensure that the financial risks are mitigated by the use of financial instruments. The Company uses interest rate swaps to reduce its exposure to interest rate movements. Financial instruments are not used for speculative purposes. The Company also uses RPI swaps to hedge future cash receipts arising from its principal activity.

Cash flow and Liquidity risk

Many of the cash flow risks are addressed by means of contractual provisions. The Company’s liquidity risk is principally managed through financing the Company by means of long term borrowing.

Auditor

The auditor, Johnston Carmichael LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.

Statement of disclosure to auditor

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.

Small company provisions

This report has been prepared in accordance with the provisions applicable to companies entitled to the small companies exemption.

On behalf of the board
JS Gordon
Director
7 November 2023
TAYCARE HEALTH LIMITED
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 MARCH 2023
- 3 -

The directors are responsible for preparing the Directors' report and the financial statements in accordance with applicable law and regulations.

 

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law).

 

Under company law the directors 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 company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

 

 

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

TAYCARE HEALTH LIMITED
INDEPENDENT AUDITORS' REPORT
TO THE MEMBERS OF TAYCARE HEALTH LIMITED
- 4 -
Opinion

We have audited the financial statements of Taycare Health Limited (‘the company’) for the year ended 31 March 2023, which comprise the Statement of Other Comprehensive Income, Statement of Financial Position, Statement of Changes in Equity and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.

Other information

The other information comprises the information included in the Annual Report other than the financial statements and our auditor’s report thereon. The Directors are responsible for the other information contained within the Annual Report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements, or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

TAYCARE HEALTH LIMITED
INDEPENDENT AUDITORS' REPORT (CONTINUED)
TO THE MEMBERS OF TAYCARE HEALTH LIMITED
- 5 -
Matters on which we are required to report by exception

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the Directors’ Report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

Responsibilities of directors

As explained more fully in the Directors’ Responsibilities Statement set out on page 3, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Directors are responsible for assessing the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditors' responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

TAYCARE HEALTH LIMITED
INDEPENDENT AUDITORS' REPORT (CONTINUED)
TO THE MEMBERS OF TAYCARE HEALTH LIMITED
- 6 -

Extent the audit was considered capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.

We assessed whether the engagement team collectively had the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations by considering their experience, past performance and support available.

All engagement team members were briefed on relevant identified laws and regulations and potential fraud risks at the planning stage of the audit. Engagement team members were reminded to remain alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

We obtained an understanding of the legal and regulatory frameworks that are applicable to the company and the sector in which it operates, focusing on those provisions that had a direct effect on the determination of material amounts and disclosures in the financial statements. The most relevant frameworks we identified include:

We gained an understanding of how the company is complying with these laws and regulations by making enquiries of management and those charged with governance. We corroborated these enquiries through our review of relevant correspondence with regulatory bodies and board meeting minutes.

We assessed the susceptibility of the financial statements to material misstatement, including how fraud might occur, by meeting with management and those charged with governance to understand where it was considered there was susceptibility to fraud. This evaluation also considered how management and those charged with governance were remunerated and whether this provided an incentive for fraudulent activity. We considered the overall control environment and how management and those charged with governance oversee the implementation and operation of controls. We identified a heightened fraud risk in relation to:

In addition to the above, the following procedures were performed to provide reasonable assurance that the financial statements were free of material fraud or error:

 

TAYCARE HEALTH LIMITED
INDEPENDENT AUDITORS' REPORT (CONTINUED)
TO THE MEMBERS OF TAYCARE HEALTH LIMITED
- 7 -

Our audit procedures were designed to respond to the risk of material misstatements in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve intentional concealment, forgery, collusion, omission or misrepresentation. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it.

Use of our report

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’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 company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Allison Dalton (Senior Statutory Auditor)
For and on behalf of Johnston Carmichael LLP
10 November 2023
Chartered Accountants
Statutory Auditor
7-11 Melville Street
Edinburgh
EH3 7PE
TAYCARE HEALTH LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2023
- 8 -
2023
2022
Notes
£'000
£'000
Revenue
3
4,710
4,217
Cost of sales
(3,274)
(2,830)
Gross profit
1,436
1,387
Administrative expenses
(942)
(848)
Operating profit
494
539
Investment income
6
6,505
6,581
Finance costs
7
(6,573)
(6,444)
Profit before taxation
426
676
Tax on profit
8
(132)
(158)
Profit for the financial year
294
518
Fair value adjustments reclassified to profit or loss
15,008
3,126
Tax relating to other comprehensive income
(3,752)
1,221
Total comprehensive income for the year
11,550
4,865

The profit for the year has been derived from continuing activities.

 

The notes on pages 11 to 23 form part of the financial statements.

TAYCARE HEALTH LIMITED
STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2023
31 March 2023
- 9 -
2023
2022
Notes
£'000
£'000
£'000
£'000
Current assets
Debtors falling due within one year
9
3,739
3,486
Trade and other receivables falling due after more than one year
9
95,029
101,278
Cash and cash equivalents
12,906
11,924
111,674
116,688
Current liabilities
10
(14,813)
(14,775)
Net current assets
96,861
101,913
Non-current liabilities
11
(103,200)
(119,802)
Net liabilities
(6,339)
(17,889)
Equity
Called up share capital
13
-
0
-
0
Hedging reserve
15
(11,437)
(22,693)
Retained earnings
5,098
4,804
Total equity
(6,339)
(17,889)

These financial statements have been prepared in accordance with the provisions applicable to companies subject to the small companies regime.

The financial statements were approved by the board of directors and authorised for issue on 7 November 2023 and are signed on its behalf by:
JS Gordon
Director
Company Registration No. SC373408
The notes on pages 11 - 23 form part of these financial statements
TAYCARE HEALTH LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2023
- 10 -
Hedging reserve
Retained earnings
Total
£'000
£'000
£'000
Balance at 1 April 2021
(27,040)
4,286
(22,754)
Other comprehensive income:
Cash flow hedges gains
3,126
-
3,126
Tax relating to other comprehensive income
1,221
-
0
1,221
Total comprehensive income for the year
4,347
518
4,865
Balance at 1 April 2022
(22,693)
4,804
(17,889)
Year ended 31 March 2023:
Profit for the year
-
294
294
Other comprehensive income:
Fair value movements on cash flow hedging instruments net of tax
15,008
-
15,008
Tax relating to other comprehensive income
(3,752)
-
0
(3,752)
Total comprehensive income for the year
11,256
294
11,550
Balance at 31 March 2023
(11,437)
5,098
(6,339)
TAYCARE HEALTH LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
- 11 -
1
Accounting policies

Statement of Compliance

The individual financial statements of Taycare Health Limited have been prepared in compliance with United Kingdom Accounting Standards, including Financial Reporting Standard 102, ‘‘The Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland’’ (‘‘FRS 102’’) and the requirements of the Companies Act 2006 as applicable to companies subject to the small companies regime convention. The disclosure requirements of section 1A have been applied, other than where additional disclosures is required to show a true and fair view.

 

General information

Taycare Health (the Company) is a private company limited by shares and is incorporated and domiciled in Scotland. The address of its registered office is Exchange Tower, 11th Floor, 19 Canning Street, Edinburgh, Scotland, EH3 8EG. The principal activities of the Company are the design, build, finance, operation and maintenance of the mental health facilities at Murray Royal Hospital and Stracathro. The agreement was entered into under the Scottish Government's non-profit distributing PPP scheme.

 

The Company’s functional and presentation currency is the pound sterling. Monetary amounts in these financial statements are rounded to the nearest one pound.

1.1
Basis of preparation

These financial statements are prepared on a going concern basis under the historical cost convention.

 

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 judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed further in the accounting policies.

 

Following the FCA’s announcement that LIBOR will no longer be published after 31 December 2021, the Company has applied the December 2019 Amendments to FRS 102: Interest rate benchmark reform. The amendments provide relief in applying the requirements of hedge accounting to certain hedges, including allowing the Company to assume that interest rate benchmarks on which hedged cash flows are based (e.g.LIBOR) will not be altered as a result of interest rate benchmark reform. Consequently, hedging relationships that may have otherwise been impacted by interest rate benchmark reform have remained in place and no additional ineffective portion of the hedge has been recognised. The transition from LIBOR has now taken place.

 

The accounting policies stated below have been consistently applied to the years presented, unless otherwise stated.

TAYCARE HEALTH LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
1
Accounting policies
(Continued)
- 12 -
1.2
Going concern

The Company has net liabilities of £true6,339,000 as at 31 March 2023 (2022: £17,889,000) and generated a profit for the year of £294,000 (2022: £518,000). Net Liabilities are entirely due to the cashflow hedge reserve which is expected to unwind over the life of the concession. The Directors have reviewed the company’s projected profits and cash flows by reference to a financial model covering accounting periods up to 2041.

 

The Directors have prepared cash flow forecasts covering a period of at least 12 months from the date of approval of these financial statements which indicate that the Company will have sufficient funds to meet its liabilities as they fall due for that period and to operate within the covenants on its borrowings.

 

Specifically, the directors have considered if, in modelled severe but plausible downside scenarios, the level of operational performance of the Company would lead to service failure points being awarded against the Company in accordance with the terms of the Company’s contract with Robertson FM sufficient to cause an event of default under the terms of the Company’s external borrowings. To date there has been no material adverse impact on the Company’s cashflows, or the service levels provided and no indication of heightened risk of subcontractor failure. As a result, the cashflow forecasts indicate that, even in downside scenarios, the Company will be able to meet its liabilities as they fall due.

 

Consequently, the Directors are confident that the Company will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of the financial statements and therefore have prepared the financial statements on a going concern basis.

1.3
Revenue recognition

Turnover represents the services' share of the management services income received by the company for the provision of a PFI asset to the customer. This income is received over the life of the concession period. Management service income is allocated between turnover, finance debtors interest and reimbursement of finance debtors so as to generate a constant rate of return in respect of the finance debtor over the life of the contract. Turnover is represented net of VAT.

1.4
Disclosure exemptions

The Company has taken advantage of the exemption in FRS 102 Section 7 'Statement of Cash Flows' part 1B, which states that a small company is not required to prepare a cash flow statement.

 

TAYCARE HEALTH LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
1
Accounting policies
(Continued)
- 13 -
1.5
Financial instruments

The Company has elected to apply the provisions of Section 11 "Basic Financial Instruments" and Section 12 "Other Financial Instruments Issues" of FRS 102, in full, to all of its financial instruments.

 

A financial asset or a financial liability is recognised only when the entity becomes a party to the contractual provisions of the instrument.

 

Basic financial instruments are initially recognised at the transaction price and subsequently at amortised cost, unless the arrangement constitutes a financing transaction, where it is recognised at the present value of the future payments discounted at a market rate of interest for a similar debt instrument.

 

Debt instruments are initially recognised at the present value of cash payable to the lender and are subsequently measured at amortised cost using the effective interest rate method, less impairment. The effective interest rate method is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument. The effective interest rate amortisation is included in interest payable and similar charges in the Statement of Comprehensive Income.

 

Other financial instruments are subsequently measured at fair value, with any changes recognised in the Statement of Comprehensive Income, with the exception of hedging instruments in a designated hedging relationship.

 

Financial assets that are measured at cost or amortised cost are reviewed for objective evidence of impairment at the end of each reporting date. If there is objective evidence of impairment, an impairment loss is recognised in the Statement of Comprehensive Income immediately.

 

For all equity instruments regardless of significance, and other financial assets that are individually significant, these are assessed individually for impairment. Other financial assets are either assessed individually or grouped on the basis of similar credit risk characteristics.

 

Any reversals of impairment are recognised in the Statement of Comprehensive Income immediately, to the extent that the reversal does not result in a carrying amount of the financial asset that exceeds what the carrying amount would have been had the impairment not previously been recognised. 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 entity after deducting all of its financial liabilities.

 

Where the contractual obligations of financial instruments (including share capital) are equivalent to a similar debt instrument, those financial instruments are classed as financial liabilities. Financial liabilities are presented as such in the Statement of Financial Position. Finance costs and gains or losses relating to financial liabilities are included in the Statement of Comprehensive Income. Finance costs are calculated so as to produce a constant rate of return on the outstanding liability.

 

Where the contractual terms of share capital do not have any terms meeting the definition of a financial liability then this is classed as an equity instrument.

Other financial assets

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.

TAYCARE HEALTH LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
1
Accounting policies
(Continued)
- 14 -
Impairment of financial assets

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 profit or loss.

Derecognition of financial assets

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company 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.

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 being measured at 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.

Derecognition of financial liabilities

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

TAYCARE HEALTH LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
1
Accounting policies
(Continued)
- 15 -
1.6
Hedge accounting

The Company has entered into arrangements with third parties that are designed to hedge future cash flows arising on variable rate interest loan arrangements, with the net effect of exchanging the cash flows arising under those arrangements for a stream of fixed interest cash flows ("interest rate swaps"). The Company has also entered into an arrangement with third parties that is designed to hedge future cash receipts arising from its principal activity (RPI swaps). The Company has designated that this arrangement is a hedge of another (non-derivative) financial instrument, to mitigate the impact of potential volatility on the Company's net cash flows.

 

To qualify for hedge accounting, documentation is prepared specifying the hedging strategy, the component transactions and methodology used for effectiveness measurement. Changes in the carrying value of financial instruments that are designated and effective as hedges of future cash flows ("cash flow hedges") are recognised directly in a hedging reserve in equity and any ineffective portion is recognised immediately in the Statement of Comprehensive Income. Amounts deferred in equity in respect of cash flow hedges are subsequently recognised in the Statement of Comprehensive Income in the same period in which the hedged item affects net profit or loss or the hedging relationship is terminated and the underlying position being hedged has been extinguished.

 

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognised in profit or loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.

For derivatives that are designated and qualify as cash flow hedges, the effective portion of changes in the fair value of the hedge is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss.

 

Any gain or loss previously recognised in other comprehensive income is reclassified to profit or loss when the hedge relationship ends. This occurs when the hedging instrument expires or no longer meets the hedging criteria, the forecast transaction is no longer highly probable, the hedged debt instrument is derecognised, or the hedging instrument is terminated.

1.7
Taxation

Taxation expense for the period comprises current and deferred tax recognised in the reporting period. Tax is recognised in the Statement of Comprehensive Income, except to the extent that it relates to items recognised in Other Comprehensive Income or directly in equity. In this case tax is also recognised in Other Comprehensive Income or directly in equity respectively. Current or deferred taxation assets and liabilities are not discounted.

Current tax

Current tax is the amount of income tax payable in respect of the taxable profit for the year or prior years. Tax is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the period end. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

 

TAYCARE HEALTH LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
1
Accounting policies
(Continued)
- 16 -
Deferred tax

Deferred tax arises from timing differences that are differences between taxable profits and total comprehensive income as stated in the financial statements. These timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in financial statements.

 

Deferred tax is recognised on all timing differences at the reporting date except for certain exceptions. Unrelieved tax losses and other deferred tax assets are only recognised when it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Deferred tax is also recognised on the revaluations of derivative financial instruments, with the movements going through the Statement of Comprehensive Income.

 

Deferred tax is measured using tax rates and laws that have been enacted or substantively enacted by the period end and that are expected to apply to the reversal of the deferred tax asset or liability.

 

1.8
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of six months or less and bank overdrafts.
Cash and cash equivalents include £12,100,000 (2022: £11,170,000) restricted from use in the business, being held in the Company's reserve accounts under the terms of its Senior Loan Facility.
1.9
Finance Debtor
The Company has taken the transition exemption in FRS 102 Section 35.10(i) that allows the Company to continue the service concession arrangement accounting policies from previous UK GAAP.  The Company is accounting for the concession asset based on the ability to substantially transfer all the risks and rewards of ownership to the customer, with this arrangement the costs incurred by the Company on the design and construction of the assets have been treated as a finance debtor within these financial statements.
1.10

Borrowings

Borrowings are recognised at amortised cost using the effective interest rate method. Under the effective interest rate method, any transaction fees, costs, discounts and premiums directly related to the borrowings are recognised in the Statement of Comprehensive Income over the life of the borrowings. Borrowings with maturities greater than twelve months after the reporting date are classified as non-current liabilities.

1.11

Distributions and reserves

As per the provisions of the Funding Agreements, the Shareholders Agreement and the Articles of Association over the life of project the full amount of the Company’s surplus funds available for distribution will be donated by the Company to Tayside Health Board. The level of distribution to be made has been set by reference to the operating model which is shared with all key stakeholders and hence this sets the expectation as to when these distributions will arise.

TAYCARE HEALTH LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
- 17 -
2
Judgements and key sources of estimation uncertainty

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported. These estimates and judgements are continually reviewed and are based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

 

Significant judgements

The judgements (apart from those involving estimations) that management has made in the process of applying the entity's accounting policies and that have the most significant effect on the amounts recognised in the financial statements are as follows:

i) Hedge accounting and consideration of the fair value of derivative financial instruments

The Company uses derivative financial instruments to hedge certain economic exposures in relation to movements in interest rates and movements in RPI as compared with the position that was expected at the date the underlying transaction being hedged was entered into. The Company fair values its derivative financial instruments and records the fair value of those instruments on its Statement of Financial Position. No market prices are available for these instruments and consequently the fair values are derived using financial models developed by the lender based on counterparty information that is independent of the Company, but use observable market data in respect of interest rates as an input to valuing those derivative financial instruments. There is also a judgement on whether an economic hedge relationship exists in order to achieve hedge accounting. Whilst the hedges have been deemed to be almost entirely effective, any ineffectiveness is considered to be immaterial in the financial statements. Appropriate documentation has been prepared detailing the economic relationship between the hedging instrument and the underlying loan being hedged.

 

The effective interest rate on senior debt instruments was calculated and is not deemed to be materially different to the interest rate applied in the financial statement and as such no adjustment has been made to the interest charge in the financial statements. This will continue to be monitored.

 

Key sources of estimation uncertainty

Accounting estimates and assumptions are made concerning the future and, by their nature, will rarely equal the related actual outcome. The key assumptions and other sources of estimation uncertainty are as follows:

i) Impairment of assets

The carrying value of those assets recorded in the Company's Statement of Financial Position, at amortised cost, could be materially reduced where circumstances exist which might indicate that an asset has been impaired and an impairment review is performed. Impairment reviews consider the fair value and or value in use of the potentially impaired asset or assets and compares that with the carrying value of the asset or assets in the Statement of Financial Position. Any reduction in value arising from such a review would be recorded in the Statement of Comprehensive Income. Impairment reviews involve the significant use of assumptions. Consideration has to be given as to the price that could be obtained for the asset or assets, or in relation to a consideration of value in use, estimates of the future cash flows that could be generated by the potentially impaired asset or assets, together with a consideration of an appropriate discount rate to apply to those cash flows.

ii) Accounting for service concession arrangements

Accounting for the service concession contract and finance debtors requires estimation of service margins, finance debtor interest rates and associated amortisation profile which is based on forecast results of the contract. These were forecast initially within the operating model at financial close and monitored throughout the duration of the project.

TAYCARE HEALTH LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
- 18 -
3
Turnover
2023
2022
£'000
£'000
Turnover arises from:
Service fee
4,710
4,217

The whole of the turnover is attributable to the principal activity of the Company, wholly undertaken in the UK.

4
Auditors' remuneration
2023
2022
Fees payable to the company's auditor and associates:
£'000
£'000
For audit services
Audit of the financial statements of the company
7
6
Audit of the parent financial statement pursuant to legisation
2
2
9
8
For other services
Taxation compliance services
4
4

Auditor's remuneration is payable to Johnston Carmichael LLP.

5
Directors' and employees' remuneration

The directors, who are also key management personnel, received no emoluments from the Company for their services as directors. The Company has no employees (2022: nil).

 

One director's fees of £19,000 (2022: £17,000) were paid by the Company during the year in respect of their services as Public Interest Director.

6
Investment income
2023
2022
£'000
£'000
Interest income
Bank interest receivable
78
3
Interest receivable on finance debtor
6,427
6,578
Total income
6,505
6,581
TAYCARE HEALTH LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
- 19 -
7
Finance costs
2023
2022
£'000
£'000
Interest on financial liabilities measured at amortised cost:
Interest payable on term loans
5,547
5,418
Interest payable on sub ordinated loans
939
939
6,486
6,357
Other finance costs:
Amortisation of finance costs
87
87
6,573
6,444
8
Taxation
2023
2022
£'000
£'000
Current tax
UK corporation tax on profits for the current period
132
159

The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:

2023
2022
£'000
£'000
Profit before taxation
426
676
Expected tax charge based on the standard rate of corporation tax in the UK of 19.00% (2022: 19.00%)
81
128
Tax effect of expenses that are not deductible in determining taxable profit
51
30
Taxation charge for the year
132
158

Factors that may effect future tax expense

 

In the Spring Budget 2021, the Government announced that from 1 April 2023 the corporation tax rate will increase to 25% and this change was substantively enacted on 24 May 2021. This will increase the company's future current tax charge accordingly.

9
Trade and other receivables
2023
2022
Amounts falling due within one year:
£'000
£'000
Trade receivables
1,219
1,126
Finance Debtor - due within 1 year
2,494
2,334
Prepayments
26
26
3,739
3,486
TAYCARE HEALTH LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
9
Trade and other receivables
(Continued)
- 20 -
2023
2022
Amounts falling due after more than one year:
£'000
£'000
Finance Debtor - due after more than 1 year
91,217
93,714
Deferred tax asset (note 12)
3,812
7,564
95,029
101,278
The finance debtor represents payments due from Taycare Health Board in respect of the Project Agreement.  These payments are receivable over the remaining life of the agreement.
10
Current liabilities
2023
2022
£'000
£'000
Bank loans secured
1,680
1,342
Trade payables
513
147
Corporation tax
102
114
VAT creditor
427
425
Accruals
5,620
4,655
Unitary charge control account
6,471
8,092
14,813
14,775

Included within accruals are amounts recognised in respect of future payments due on lifecycle underspend of £5,590,000 (2022: £4,541,000), the timings of which are uncertain.

11
Non-current liabilities
2023
2022
£'000
£'000
Bank loan secured
80,142
81,822
Subordinated debt
9,388
9,388
Issue costs
(1,579)
(1,665)
Derivative financial liability - interest rate swap
4,847
19,763
Derivative financial liability - RPI swap
10,402
10,494
103,200
119,802
TAYCARE HEALTH LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
11
Non-current liabilities
(Continued)
- 21 -

The Company has a term loan with a banking syndicate comprising the Cooperative Bank plc, Barclays Bank plc, M&G Investment Management Ltd, Bank of Scotland plc, Kommunalkredit Austria AG, Swiss Re and Siemens Bank GmbH secured by a bond and floating charge over its present and future assets and undertakings. The loans are also secured by a guarantee supported by a bond and floating charge over the assets and undertakings of the Company’s parent company, Taycare Health Holdings Limited. The loan bears interest at 6.93% per annum under a swap agreement entered into by the Company. The swap rate is fixed for the duration of the loan. The loan is stated net of finance costs of £1,579,000 (2022: £1,665,000) and is repayable in half yearly instalments which commenced 31 March 2013. The final repayment date is 17 May 2041.

On 1 June 2013, the equity bridge was replaced by subordinated debt of £9,388,000 provided by Taycare Health Holdings Limited, bearing interest at 10% per annum, and repayable in 2042 and would rank alongside ordinary creditors in the event of winding up.

2023
2022
£'000
£'000
Debt can be analysed as falling due:
In one year or less, or on demand
1,680
1,342
Between one and two years
1,780
1,680
Between two and five years
7,076
6,127
In five years or more
80,673
83,403
Finance costs
(1,579)
(1,665)
89,630
90,887
12
Deferred taxation

Deferred tax has been provided for at 25% (2022: 25%) in the financial statements and is set out below

2023
2022
Deferred tax credit comprises:
£'000
£'000
Deferred tax relating to the adoption of hedge accounting
7,564
6,343
Deferred tax relating to movement in fair value
(3,752)
1,221
3,812
7,564
2023
Movements in the year:
£'000
Balance at 1 April 2022
7,564
Movement through other comprehensive income
(3,752)
Balance at 31 March 2023
3,812

In the Spring Budget 2023, the government announced that from 1 April 2023, the corporation tax rate will increase to 25% and this change was substantially enacted on 24 May 2021. Deferred tax at 31 March 2023 has been calculated on the rate of 25%.

TAYCARE HEALTH LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
- 22 -
13
Called up share capital
2023
2022
2023
2022
Ordinary share capital
Number
Number
£'000
£'000
Ordinary A shares of £1 each
100
100
-
-
Ordinary B shares of £1 each
1
1
-
-

A and B shares rank pari passu in all respects.

14
Reserves

The company has two main reserves:

 

Hedging reserve

 

Retained earnings

15
Hedge accounting

Derivatives are financial instruments that derive their value from the price of an underlying item, such as interest rates or other indices. The Company's use of derivative financial instruments is described below.

 

The Company has entered into interest rate swaps and RPI swaps with third parties for the same notional amount as the Company's variable rate borrowings with banks which has the commercial effect of swapping the variable rate interest coupon on those loans for a fixed rate coupon. The RPI linked swap hedges against potential movements in future revenue cash flows arising from changes in RPI. The interest rate swaps were entered into at a base rate of 4.395% in July 2012 and expire in March 2041. The RPI swaps were entered into in June 2010 at a base rate of 3.1% and expire in May 2041.

 

The Directors believe that the hedging relationship between the interest rate swaps and related variable rate bank loans is highly effective and as a consequence have concluded that these derivatives meet the definition of a cash flow hedge and have formally designated them as such.

 

The Company's derivative financial instruments are carried at fair value. The net carrying value of the derivative financial instruments at 31 March 2023 amounted to liabilities of £15,249,000 (2022: £30,257,000). All of the movements during the year in the fair value of these derivative financial instruments have been recorded in the cash flow hedge reserve amounting to a credit of £11,256,000 (2022: credit £4,347,000).

 

TAYCARE HEALTH LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
- 23 -
16
Related party transactions

During the year the Company incurred the following expenditure with related parties. The amounts payable at the end of the year are also set out below:

Name of related party
Nature of relationship
Taycare Health (Management) LLP
Fellow subsidiary of Cobalt CPI Limited & Cobalt Project Investments (Taycare) Limited
Description of
Expenditure
Creditor
transaction
2023
2022
2023
2022
£'000
£'000
£'000
£'000
Taycare Health (Management) LLP
Management fee
706
656
312
-
17
Immediate and ultimate holding company

The immediate holding company is Taycare Health (Holdings) Limited, a company incorporated in Scotland. Taycare Health (Holdings) Limited does not consolidate the results of Taycare Health Limited. The Taycare Health (Holdings) Limited shareholding is the subject of a share pledge (security arrangement) between Taycare Health (Holdings) Limited and the Co-operative Bank PLC.

 

At the period end Taycare Health (Holdings) Limited is owned 50% by Cobalt CPI Limited, 50% by Cobalt Project Investments (Taycare) Limited. There is no deemed ultimate controlling party.

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