Using greenbacks creatively for a dot.com future

Vital Statistics

BRIDGET FISHLEIGH
Age : 32
Lives in : Brighton
Occupation : Public relations
Earns : Living expenses
Mortgage : £33,000 covered by rent
Debts : £1,000 on credit card
Investments : $30,000 and privatisation shares
Pensions : none
Aims : to build a business and start saving

Bridget Fishleigh and her boyfriend, Damon Crane, met while they were working in New York. She says: 'We clicked from the start but it felt a bit stupid going all the way to America to find each other.'

Damon is 30 and had been in the US for four years as general manager of the American arm of a UK creative agency. Bridget was there for two-and-a-half years, working for a PR agency that specialised in publicity for hi-tech companies. She says ruefully: 'I helped make a lot of people rich.'

Now the couple have returned to the UK to set up their own communications agency, Nomad Communications, which will provide PR and creative services for Internet start-ups and dot. coms in this country. They have settled in Brighton, renting a flat that doubles as their office, and already have two clients. Within a year, they want to buy somewhere, but this depends on finding the right sort of accommodation.

They still like the idea of working from home. Bridget says: 'We are planning to take on a few extra people within the year so need to find a house with suitable space for an office. Plus we would like to plan for a family.'

Bridget already owns property in the UK. She and her sister bought a flat in London in 1992 for £72,000 and it is now worth about £150,000. She has an endowment mortgage on this property, which is rented out.

Bridget has not decided what to do about the flat. 'It seems a bit mad to sell it and take myself off the property-owning ladder,' she says.

While she and Damon were working in the US they managed to save and have $30,000 in American bank accounts. Bridget wants to know what to do with this money.

'We don't mind if we leave the money in the US or bring it back to the UK. We want to get the best bang for our buck as we are not using it at the moment.'

Their only other investments are Bridget's BT and BAA shares, worth about £4,000, which her parents bought for her when the companies floated.

At the moment the couple are taking out of the business only as much as they need for daily living expenses, but are talking to their accountant about how best to structure the business. Now they want to know how to best to invest their money.

Adviser 1: Danielle Leich

Bridget and Damon must declare their United States savings on UK tax returns but they may also need to complete a US tax return, although a double-tax treaty means they will not be taxed twice.

There seems no advantage in keeping the cash in the United States and, if they have no strong thoughts on dollar/pound exchange rates, they could transfer it in several tranches to benefit from different rates. But they should weigh this against bank charges for each transaction.

Assuming they need this money to buy a new property, they should keep it in bank or building accounts for easy access and to keep their capital safe.

If they do not intend using all their cash on a house purchase and are prepared to invest for at least five years, they could consider a stocks and shares Isa - although they need to be sure they are comfortable with the risk involved.

As they work in the volatile area of Internet companies, they may be risk averse, in which case they could choose a cash Isa or Index-Linked National Savings Certificates.

Bridget's mortgage with her sister could restrict her ability to get a good deal from a new lender. She could switch her mortgage to a buy-to-let scheme; the interest payments are higher but she can get a better deal on her next homeloan.

If Bridget lived in the property before moving to the US, she could sell the flat now and avoid capital gains tax by claiming it as her principal residence.

Danielle Leich works for PriceWaterhouseCoopers.

Advisor 2: Neil Bailey

Bridget and Damon should consider the impact of death, disability or serious illness on their business and their personal lives. Competitive providers of insurance include Swiss Life and Scottish Provident.

They should also consider income protection which provides a replacement income in the event of long-term sickness or disability. As they don't have an income track record in the UK, they will need to be careful that they do not over-insure. Friends Provident and UNUM have competitive schemes, the former with guaranteed premium rates.

Bridget should also clarify the ownership of the property she shares with her sister in case of disaster. Many lenders will require at least two years' accounts and about 15 per cent deposit before lending to the self-employed.There are lenders who will provide reasonable terms to self-employed people with less than one year's accounts.

Most of the cash should stay liquid, as a short-term contingency fund. Equity-based investments are not suitable if the cash is needed within five years. They should consider bringing the cash back into the UK, or at least converting it to a sterling account which will not be subject to exchange-rate fluctuations. Accessibility is likely to be more important than a marginally greater interest rate. Consider First-e internet account, or C&G Tracker account if they prefer a traditional type of account.

Neil Bailey is a certified financial adviser with Winslow-based Sensible Financial Planning.

Advice is for guidance only.

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