Limited Company
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.