Company previously completing their accounts and corporation tax in house
We were approached by a company who normally dealt with all of their accounting and tax function in house to complete some technical advisory work. After completing this, the directors asked us to complete the accounts and corporation tax return for the relevant year as part of the implementation of the advice.
As part of our review of the opening balances, we noted that some errors had been made in the previous year’s corporation tax return in not claiming certain allowances which were due to them. We then extended the review back and found a similar under claim in the previous year. Also, there was an error resulting in an underpayment in one year, which would have resulted in substantial penalties being charged if HMRC had picked up the error first, and without the claims we had identified to reverse the position.
Overall the client benefitted from not having to pay the underpaid tax, interest and penalties of over £3,500 and also received a refund of more than £5,000 in relation to the previous two years. Furthermore, the client would have continued overpaying corporation tax year on year by around £5,000 per annum.
The UK tax code is the longest in the world, and a survey by the Chartered Institute of Taxation revealed that most MPs (who vote on the tax law in the first place) need professional assistance from accountants to complete their tax returns. Therefore it is no surprise when someone completes a return but falls foul of an unknown clause in the 11,000 pages plus of UK tax law.
The client now wants us to continue completing their annual accounts and corporation tax returns, meaning they benefit from the peace of mind of knowing their compliance matters are thoroughly and professionally dealt with, they have the benefit of pro-active tax planning meetings before their year-end, and of course they have more time to spend running their business.
Research and development tax credits
During a planning meeting with the client, we identified that the project they were undertaking would qualify for Research and Development Tax Credits. Initially the client anticipated a relatively short timescale before the project turned cash positive, so we claimed enhanced loss relief, worth almost £7,000 in immediate tax savings and over £12,000 in savings against future tax payable. In the third year, we identified that, as the project was taking longer than anticipated to generate cash, it may be wise to use an option to “surrender” the loss in return for a tax free payment from HMRC.
After making the initial claim, we agreed a final payment of over £25,000 from HMRC, a valuable boost to the cashflow of the business in the R&D phase. In the first three years, a total of over £32,000 cash improvement and future cash savings of a further £12,000 have resulted from the successful claims made by CRM, with further benefit expected from claims in future years. What is more, since the client is on a Fixed Price Agreement, all this work was undertaken within a fixed monthly fee agreed upfront, meaning there was no additional cost to the client over and above what was already budgeted for.
Proactive tax solutions
Following the preparation of statutory accounts for our client, a small company in the construction industry, we identified a number of opportunities for our client to save tax as part of our tax planning review service which we perform free of charge on every set of accounts we prepare.
There were a number of small annual savings to be made, but the main opportunity to save tax surrounded profit extraction from the business. By restructuring the way profit was extracted from the company, estimated tax savings of over £100,000 were made over the forthcoming ten years.
As a small company run by a husband and wife team this is a very significant amount of money to them and their business.
After losing £25,000 in revenue due to accounting errors, a local company approached CRM with a view to reviewing accounting systems and processes to report to the board. Following this, CRM were appointed to implement a new accounting package and to assist with the implementation of new recommended systems and controls.
The client was delighted to have accurate financial information on a departmental basis and more stringent controls over income and expenditure, meaning there has been no repeat of the loss of revenue. Furthermore we have helped the client make significant cost savings amounting to over £10,000 per annum through the analysis of data from the new system, and as a sage reseller were even able to procure the software at a discounted rate.
Proactive audit and assurance services
An existing company, a UK subsidiary of an international group, engaged CRM to provide accountancy and audit services. In the first two years of the engagement to date, CRM identified, as part of our client focussed audit and assurance services, significant items to the benefit of the company. Specifically these were a VAT reclaim of over £8,500 which would otherwise have gone unnoticed, and also an otherwise unidentified claim on their landlord which was not being paid which amounts to over £27,000 plus further sums ongoing. These amounts are significantly in excess of audit fees charged, so the client has actually made a substantial profit from both years’ audits. Clearly the identification of these sums has both improved cashflow and strengthened the balance sheet of the company.
Capital allowances claim on building
As part of our normal pro-active tax service, we identified that our client owned their trading premises, and that there may be scope to claim allowances against income tax on part of the cost of the building without adversely affecting the Capital Gains Tax position on the future sale of the building.
This is a highly specialised area, requiring site surveys etc, so we acted jointly with our associates who specialise purely in this work to carry out a review of the client’s building with our assistance.
We were able to ensure that our client could not lose out from the review, which was conducted on a no upfront fee basis, so they would only be charged a small percentage of any claim identified and agreed with HM Revenue & Customs. If no viable claim was identified, no charge would be made for the review work.
Upon completion of the review, a claim was agreed with HMRC which was worth approximately £35,000 in reduced tax bills to our client, who got an immediate benefit in the form of a rebate for several thousand pounds even after deducting the survey costs, and ongoing lower tax bills for as long as they own the building.
Debtor review at audit saves client £4,000
As part of our audit testing on a recent audit engagement, we enquired into a negative amount showing on the creditors ledger. This prompted an investigation by the client who was not aware of this balance, and a recovery of circa £4,000 followed. Since recovery required an insurance claim to recover, any further delay in notification would have resulted in the claim failing and the client losing the money for good. Needless to say, the client was very happy with our proactive audit approach.
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