AFD Software

AFD Software was started as a home-based business by Ann & David Dorricott in West Kilbride, Scotland. It began as a computer bureau, fulfillment house and office stationery supplier in 1983. In 1985 it began developing and supplying computer systems to charities and small direct marketing businesses throughout the UK.

As a result of its involvement with computer address lists - both as part of its bureau business and the computer software developed for customers, AFD built up world-class skills in "Address Management" - ie the handling of mailing addresses using computer databases.

By 1994 it was acting as a reseller for a manufacturer of Rapid Addressing software - in which time is saved and accuracy improved by using the Postcode to look up and enter an address by referencing it to data from the Royal Mail. Although the technology was impressive - and the savings of up to 80% of effort in entering addresses very attractive - AFD found that the existing products were too expensive (at 850 per computer) and difficult to integrate into real-world computer systems - such as the charity administration systems AFD was developing and selling.

AFD therefore produced its own version of this software, and brought it to market in early 1995 through a new company "AFD Software Ltd". The product was distinctive in that at only 154 per computer it was affordable, and it had ease-of-integration built in - so that software developers and systems managers could easily benefit from Rapid Addressing technology within the every-day applications of the organisation.

Within a year, to wide acclaim in the press, AFD had risen to become second in terms of value of Royal Mail data sold, and first in terms of units sold - as it was able to expand the Address Management marketplace.

By 1997, the business had expanded so much that premises were becoming a problem. An offer to buy the by-now highly successful AFD Software Ltd business was received - and was almost completed. The potential impact of UK Capital Gains tax (40%) on the deal was one of the significant reasons why AFD withdrew from the sale - but the business still had other problems of growth to face - including the likelihood that a move out of the original premises was inevitable as growth continued. Since the business was highly profitable, most of the key staff were also suffering high levels of personal taxation at 40%.

At this time AFD's historic general computer business had been run down, and the firm was operating as a Software House, developing innovative address management solutions based on enormous public databases. With one or two field sales representatives, most of AFD's business was carried out by telephone, fax or Internet based sale, with a CD-ROM delivered to the customer by post.

Re-location to the Isle of Man

During a visit to the Isle of Man on holiday, David & Ann began to consider the benefits of further developing the software business in a more friendly tax regime - but it became clear that the only way in which this could be achieved with integrity was to move the business to the Island - so a feasibility study was undertaken, and which was able to report back to the directors (in order or priority):

• The families of the key staff who would move to the Island were enthusiastic about the move. The quality of life, community spirit, incredible beauty of the island, first rate education system, safety and law and order were all identified as significant advantages to the move.
• Our team found friendliness, helpfulness and welcome from everyone they met - Government, Commercial & Professional representatives. Schools were especially helpful when parents visited and requested information.
• The Island's unique relationship with the UK (and Europe) was identified as a key benefit. Our customer base is almost exclusively in the UK - and common VAT arrangements and lack of customs barriers enabled the business to move and operate with no change to our sales model.
• Communications were also identified as being first rate. Meetings with Manx Telecom, two of the Island's Internet Service Providers and the Isle of Man Post Office identified that the key infrastructure was equal to or better than that in the rural part of Scotland in which the business began.
• AFD identified a significant improvement in the postal services offered by the Isle of Man - (and this remains a significant continuing benefit), The IoM PO was much more flexible and commercial than its larger UK neighbour - and offered vastly improved customer service, similar or lower pricing on our type of traffic and much later "latest posting" times - a critical factor for a technology business.
• Transport to and from the Island was identified as being an additional expense - but the nature of our business meant that this would have insignificant impact. Personal travel is only a very small part of our business - and travel times from our office in Ramsey to Central London - whether by Air or even by Ferry + Train (during the summer season) were actually shorter than from our West Kilbride office.
• Property was readily available to which the business could make a quick move - no less than 3 properties in Ramsey were suitable.
• Housing was available at a comparable or slightly higher cost than UK equivalents - but the availability of low personal taxation more than offset any price differences.
• Lack of Capital & Inheritance Taxation meant that the business could continue to develop its products - in which the main assets are Intellectual Properties, without concerns of 40% Capital Gains Tax and Inheritance taxes.
• Low and family-friendly personal taxation made our key staff enthusiastic about the move - more than offsetting apparently higher retail, fuel and heating costs. Key benefits identified included: lower actual tax rates, higher tax thresholds, transferability of tax allowances between husband & wife, far lower Local Authority Rates.
• The common National Insurance, Health & State Pension arrangements removed a host of concerns.
• The Isle of Man Government offered various incentives for the business to move to the Island. AFD welcomed these benefits - but they were the "icing on the cake" rather than being a prime motivator in the move.

The business made its decision to move in Mid August 1997: by the beginning of October 1997 AFD had established an "advance team" in office in Ramsey, and the business completed its transfer by 1 November that year.

In the five years since AFD arrived on the Isle of Man, AFD Software's turnover has risen by 500%, it has purchased its own office accommodation in Ramsey - and expanded its staffing. We have discovered no significant downside to the move - either for staff at a personal level or from the business itself - other than an endemic inability to move forward major Manx National projects for important infrastructure due to a strong resistance to change within the community. This has not yet had major deleterious effect on the core business - but has lead to major investments in other projects being directed off-Island.

By centring the firm on Ramsey, AFD has been less affected by the general difficulty experienced by many firms in recruiting quality staff - and an efficient, happy team has been built. We have had no difficulty in obtaining work permits for staff with key skills when these have not been available from the local employment marketplace, but have provided quality employment and training opportunities for Isle of Man workers as well as for some "imported" staff.