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

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.

Charity

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.