If you need to know how to claim EIS income tax relief and enjoy what is...
As a firm of Chartered Accountants in London, we often have to correct a messy set of books.
We responded to an online request for quotes for accountants providing energy-efficient property installations. We did not know too much more about the company other than a few basic facts and after an initial conversation we met up for an interview.
At the interview, we noticed some marketing booklets from a well-established accountancy firm in North London so we knew that we had to offer our best terms to have a chance of success. Fortunately, we struck a good relationship with the director and because we were able to place a bookkeeper on site for one day a week we got the contract.
At first, this appeared to be a standard company. The old accountant was providing bookkeeping services on VT software and they would pass back and forth backups to make sure that everyone was on the same page. However, the director was concerned that despite a reasonable turnover and basic calculations of decent profits per job the company still had no cash.
Moving to Xero
The first thing that we did was to convert the VT data onto an online bookkeeping system called Xero. This meant that all records could be worked on and shared simultaneously, anywhere because it is a “cloud” based software. Secondly, we switched to a cash basis VAT scheme and therefore improving cash flow for them.
In doing so we needed to review and correct what was a messy set of bookkeeping records. The added complexity was that because this company operates in construction that the HMRC Construction Industry Scheme (CIS) needed to be deducted from subcontractors. This is a type of payroll scheme but much more complicated in its mechanics.
With Xero operating well and the new processes in place, all ongoing work was up to date and where it should be. However, as we looked back at the previous years to make sure that we were starting off at the correct place we noticed that a lot of the records in VT were matching up with expectations.
How We Fixed It
The certificates of CIS suffered by our client were not collected centrally. The CIS deducted from suppliers had not been consistent and properly declared either.
In the end, we went back three accounting years and discovered £40,000 in under claimed CIS relief. After collecting all the information together and writing to HMRC on how to amend prior returns we brought everything up to date albeit over more than six months.
We also found near £20,000 in un-invoiced fees which were paid almost immediately and recovered more than our fees are likely to be for several years!
The director was right about his hunch and now the business is operating with positive cash flows and growing once again. We have applied to the banks to extend credit with the new financial positions.
So if you'd like to work with a firm of Chartered Accountants in London, get in touch.