Limited Company – Consultant
Chippendale and Clark were approached by a management consultant who had been completing their own Limited Company Accounts for the previous 5 years. The VAT, Corporation Tax and Personal Tax returns for the previous 5 years has not been submitted, and overdue reminders and penalties were being issued by HMRC.
This prompted the appointment of Chippendale and Clark.
Upon our initial discovery, Chippendale and Clark found that the figures within the Company Accounts were misstated and that all five years’ worth of Accounts we required to be resubmitted.
Within two months of our appointment and after extensive information gathering, the accounts had been drafted ready for the client’s approval. Within 5 months the amended accounts had been sent to Companies House and all Tax returns had been calculated and submitted.
The client was extremely satisfied with the work carried out and continued to appoint Chippendale and Clark for ongoing work, with the addition of bookkeeping services. The Consultant had been originally utilising the Flat rate scheme for VAT, however due to the changes to the Flat Rate scheme introduced on 1st April 2017, it worked out that the client would be financially better off on the Standard Rate VAT scheme.
Due to the change of VAT scheme, it was decided to migrate the client onto cloud accounting software, Xero. This meant that we were able to complete the bookkeeping monthly, producing quarterly management reports for the client. This enabled our client to monitor their sales income and expenditure, giving the client up to date and clear financial information to be able to make relevant business decisions. And of course, being cloud software, they were then ready for when the legislation, Making Tax Digital was introduced on 1st April 2019.
The first set of accounts which were amended for the client; the company had made a £39.5k loss. Over the seven years in which we have now acted for this client, their profits have rocketed up to £140k before Tax. This makes it even more crucial that the accounts and VAT are now submitted correctly.
Since our appointment, the client has not missed any accounting or Tax deadline and are now able to review their financial records on a monthly basis.
Limited Company – Painter and Decorator
When Chippendale and Clark brought a portfolio of clients from a retiring accountant, there were many clients who were sceptical about this move for their business.
Humans are a creature of habit, so when individuals are made to make changes, it is only natural for anxiety to kick in as this could be a daunting prospect.
The client was initially worried about the consistency of their record keeping and they were structured in the way in which they liked to record their financial statements, this happened to be paper based. Chippendale and Clark arranged a meeting to discuss how the bookkeeping would proceed without impacting their current record keeping systems.
Since Making Tax Digital was introduced, many clients have had no choice in changing accounting systems and procedures to be able to submit their VAT digitally.
For many of our clients, they have enjoyed snapping their receipts into Receipt Bank and using Quickbooks or Xero to post their sales invoices- sending them directly to the customer for payment! In fact, many clients have found that it has improved their business extensively and has even improved their attitude towards accounting in general! But this isn’t the same opinion for all.
In our painter and decorator’s situation, a new digital way of completing accounts and VAT made them feel anxious. So, in this case, we did not change the way in which the client provided us with the records, but only with the way in which we processed them internally, thus illuminating any stress to our client whilst ensuring that the client was still keeping up to date with the new reporting standards.
Chippendale and Clark now have a fantastic relationship with this client, it always revolves around a warm friendly year end accounts meeting. As a result, it is always a pleasure to service this client knowing that the client is benefiting from our flexible service.
Sole Trader – Antiques Dealer
A new client approached us after a meeting with a HMRC inspector who appeared at their front door.
Our client had been buying antiques from auctions and selling them at a small profit online, they completed this alongside their employment and therefore assumed that this income was as part of their hobby which they strongly believed did not require declaring to HMRC.
HMRC reviewed the transactions and deemed this to be business income. This trading income had then been backdated 6 years as this was the maximum time HMRC could inspect the case based on a careless Tax return.
HMRC worked out that the estimated Tax due over this time frame, excluding any penalties, would be Tax of over £22k. HMRC had obtained records from the Seller platforms to estimate the profits from this income only reducing expenses by the auction transactions.
Chippendale and Clark took on the case to check HMRC’s workings. We obtained all the client’s bank statements and thoroughly extracted any business expenses in which were suffered as a result of the trading income reducing the profits extensively.
As a result of our thorough work, the tax bill over the six years was almost halved to £11.9k.
We then assisted the client in arranging a payment plan to HMRC for this figure.
Without our help the client would have paid above what they were required to for their Tax bill.
Sole Trader – Local Builder
(Not initially VAT registered)
A local builder was having his bookkeeping completed by his unqualified and unmonitored father in law. He approached us when HMRC wrote to him with a VAT enquiry suggesting he should have registered for VAT in the past as his latest tax return indicated that he was over the compulsory VAT registration threshold.
The local builder’s “bookkeeper” had submitted tax returns and failed to recognise that the client should have been charging VAT on his work for a number of years. The client actually went over the VAT threshold in 2015.
This is not an uncommon occurrence, we have been this before with a client that had his bookkeeping completed by his brother. When this happens though HMRC seek to recover VAT on all turnover from the date the business should have been registered. There is no come back normally to the bookkeeper as they are not advising on tax matters and the client is left facing a huge HMRC vat and penalties charge on income he hasn’t received.
This case was damage prevention as once you are over the threshold the only option is damage limitation.
We were in constant contact with the HMRC agent in charge of the case. We agreed a date of registration according to turnover. The lowest possible outcome of VAT owed to HMRC was agreed and then we negotiated penalties down to the lowest legal amount for a prompted VAT enquiry.
We were successfully in savings the client thousands in additional VAT and penalties that could have been paid over if the client hadn’t engaged us.
There was a small win to be had, we went back and amended previous income tax returns with the reduction in turnover from the VAT. This created an income tax rebate and recouped some of the lost VAT.
We now completed this client bookkeeping monthly, tax returns yearly and vat returns quarterly, provide monthly profit and loss accounts and can advise on all matters of VAT and income tax on a real time basis.v
Limited Company – Construction Industry
Local high turnover business with significant profit Levels, in the construction industry
We engaged a local construction business with a high turnover and profit. Unfortunately, this business had not been subject to good advice from their preceding accountants. They were behind 6 months with vat returns and 2-3 months with CIS returns. They were incurring high levels of VAT surcharges and Late Cis submission fines. The total surcharges incurred since 2014 were over fifty-five thousand pounds.
This was an interesting case as poor vat advice had been received by the preceding accountant. The client was charging VAT on work to new build homes. New build homes should incur a 0% vat rate on materials and labour supplied in the course of the build. However, our new client had been charging 0% on materials and 20% on labour.
This is significant as the client always struggled to pay their VAT bills on time therefore incurred 15% vat surcharges each quarter on top of their vat bill. This was on average £6K per quarter.
Our remedy was twofold: Fix the records ongoing and fix the past.
Firstly, we had to keep accurate records going forward, so we went about installing a new bookkeeping system for the client. We utilised QuickBooks online so that the client could raise their own invoices. We set up services in QuickBooks online so all the client had to do was choose the type of house he was working on, new build, conversion or work on existing structure. QuickBooks then automatically applied the correct rate to the services we had set up. We then configured QuickBooks to correctly calculate CIS suffered on each piece of work.
This client was not a simple bookkeeping client only the most experienced bookkeepers could successfully keep this client records in order. We handed this booking task to one of our most senior and trusted accountants. I believe that the majority of issues the client had seen was because the previous accountant had staff that were not experienced enough working on this complex client.
The second fix was to one bring the old bookkeeping up to date, this allowed us to make a reclaim to HMRC for CIS suffered. We recently received 80K back from HMRC. At the same time, we went back 4 years on the client’s sales to look at all the vat that was incorrectly charged. We then put in an overpayment claim to HMRC for £300K for overpaid vat to HMRC for that period. This Vat was incorrectly charged so we arranged for this £300K to be returned to its customers along with credit notes, but the side effect of doing this was that we erased the surcharges that the client had paid over the 4 years and successfully reclaimed £55K from HMRC rightly for our customer.
This project was of particular success as the directors feel without our involvement the company would have gone under. But we have shorted bookkeeping times with the use of modern software.
We are currently in the process of setting up a holding company to create a group structure so that the directors can utilise the profits on the company in an investment company.
We are now producing accurate monthly reports for our client and their finance companies. There is a real transparency and clarity around this company’s finances now.
We brought a portfolio of clients from a retiring accountant and a sizeable local charity was among the clients.
There were two issues identified the charity was paying over VAT on all its earnings, secondly the charity wanted to extend its existing building and wanted to recover the VAT.
Chippendale and Clark identified that there were certain exemptions that the charity could apply to its income in order to make its income exempt. The charity was able to keep its prices the same but not have to pay over vat 1/6 of its income to HMRC. We conservatively estimate this saved the charity £60K per year.v
We not only achieved the above but we went back 4 years and applied for a rebate of all vat paid, we successfully reclaimed just under £200K in VAT for this local charity. We were then able to set up a system to recover the vat on the full build of the extension to the charitable building. The full build cost as £300K so the vat savings was £60K.
Not surprisingly after this we had an HMRC inspection which was passed with no amendments.
This is a real example of how using an accountant with good tax knowledge can really benefit your charity/firm.
You never know what you might have saved.
Services to suit your business
As well as producing your Annual Accounts we’ll analyse them with you to help boost productivity.
Using cloud-based software, we produce real-time and insightful management accounts.
Increasingly complex legislation means our comprehensive payroll administration service could save you time and money.
As well as completing your VAT returns, we ensure you are always on the VAT scheme most beneficial to your business.
We can help balance your business and personal wealth so your money works harder for you.