Client Success Stories
Noted below are just some examples of ways in which we have helped our clients. The first five are noted in some detail to give plenty of information about the circumstances and benefits. Thereafter, rather than go into lots of wordy detail, concise examples are given to give a ‘flavour’ of other success stories.
Tax Debt to Tax Refund
A company came to us in a desperate state. Their accountant had left town and could not be traced. Worse still – he had disappeared with their accounting records, and then HMRC debt collectors turned up on their doorstep asking for £14,000 taxes owed!
An existing client of Cowley Holmes referred them to us.
We carried out an immediate thorough review and discovered to the clients horror:
- no PAYE Returns had been filed for the past 4 years
- no Personal Tax Returns had been filed for the past 5 years.
We met to plan a course of action to ease their immediate anxiety.
The Revenue were extremely uncooperative and imposed a short deadline for the outstanding PAYE Returns. After repeated calls an HMRC Officer took responsibility for the case. We tenaciously pursued the case.
The result: a £20,000 tax refund!
The Personal Tax Returns were also prepared to meet an immediate deadline.
The Revenue said they had been filed a day late.
We had however sent the Returns by Recorded Delivery and after contacting Royal Mail, HMRC accepted our evidence on the timely delivery.
The result: a £9,400 personal tax refund!
Cowley Holmes steered this situation from “Horror Story” to “Success Story” for the client through:
- assurance to the client at an early stage of a plan of action
- implementation of expert technical knowledge
- holding HMRC firmly accountable for their responsibilities
- fast-track handling
- informative communication with the client throughout.
Late VAT Registration – Problem into Profit!
A sole trader had been preparing his own accounts and tax returns for a couple of years since starting to trade.
He came to us after difficulty filing his online Tax Return. Of course we were able to solve this problem for him, but in checking his records up to date we found that he had exceeded the VAT turnover registration threshold for a number of months. This can lead to a significant build-up of VAT owing to the Revenue. However, because his customers were VAT registered themselves, we advised him on raising VAT-only invoices to collect the outstanding VAT that his customers could reclaim on their VAT Returns. In this way, the Revenue got their money, our client got no penalties for late registration because he had notified as soon as he became aware through our advice, and he is now sure that his tax affairs are correct, since we review his VAT for him on a quarterly basis.
And there is even more good news! We registered the client under the Flat Rate Percentage Scheme for VAT accounting, and because of the lower percentage that he pays to the Revenue under this scheme he actually makes a ‘VAT Profit’; he pays the Revenue less VAT than he collects from his customers!
He’s turned his ‘problem’ into ‘profit’.
Transfer of business to next family generation
Cowley Holmes advised on the tax efficient transfer of shares from the founding married couple of a trading company, to their son and his wife.
Further, through the calculation of the most appropriate shareholding ratios, profits from the business can now be distributed in an extremely tax-efficient way to:
- The now semi-retired founding married couple to give them funds to enjoy their increased time out of the business
- 2) The son and his wife, who now have control of the business and whose increased contribution to the success of the business is matched by increased monetary rewards in the form of increased dividends.
From Partnership to Limited Company
This husband and wife team had been trading for many years as a partnership with a 30th April year-end. This date for a year-end is fine when profits are continually increasing because the tax for a given year is paid a year later than it would be for say a 31st March year end. However, when profits, as in this case, were fluctuating up and down, the situation often arose when the tax on a successful earlier year’s profits was having to be paid out of reduced cashflow from a not so good year’s profits.
We changed the accounting date to:
- 31st March, to better match the tax payments to a year’s profits that they related to, to help manage cashflow, and
- Take advantage of a tax reduction called ‘overlap relief’ to give the partners much reduced tax bills on the change of accounting date.
We also brought a next generation family member into the business as a partner instead of as an employee, which saved significant amounts of PAYE tax and national insurance payments.
When the timing was right we then transferred the business into a Limited Company to
- Reduce further the national insurance payments each year by eliminating the charge to national insurance on self employed profits
- Simplify the tax paid by the business to just one payment each year instead of half yearly ‘on account’ payments that the partners always found confusing
- Enable the different categories of business owner to have different classes of shares to receive dividend payments appropriate to their positions in the business and their needs
- Give the business a much more established commercial image in the market place.
Sale of Sole Trader business to Limited Company – amazing tax relief!
We took on the accounts and tax advice for a sole trader who had gradually built up his business over a number of years, from an initial purchase.
We used the established valuation method in his industry to calculate a £45,000 goodwill value to his business in respect of its recurring client income. This was negotiated and agreed with the Revenue for tax purposes.
It enabled him to:
- Save over £8500 by taking the £45,000 out of the business as a capital gain, on which we claimed a capital gains tax allowance of over £10,000, and he paid tax at only 10% on the taxable part
- Save a further £9000 on tax deductions for the £45,000 goodwill purchased by his Limited Company!
P.S We have also acted for a significant partnership business and advised them on undertaking the above similar strategy that saved the partners overall in excess of £600,000!
Other client success stories in summary:
- Tax planning for dividends via shareholdings of husbands and wives and separate class of shares for investor
- Advice to secure 10% Entrepreneurs Relief tax on sale of the business
- Creation of holding company above trading subsidiary to enable dividend payments from the subsidiary to the holding company to fund investments in property in the protected environment of the holding company
- Advise on disclosure of Swiss investment income to agree favourable settlement with HMRC
- Advice on the valuation and strategic steps for sale in a tax efficient way of significant grounds and garden previously forming part of main residence
- Advice relating to property to secure favourable capital gains tax treatment instead of higher trading profits tax
- Advice on commercial property lease to achieve favourable VAT and capital allowances claims
- Advice on the tax relief for company payments into directors personal pension plans
- Creation of 2 separate trading companies from one original company to aid shareholders in the accountability of directors for results in each separate trade division
- Advice on the winding down and dissolution of a trading company with advice on the tax efficient extraction of funds by shareholders
- Due diligence work on behalf of the purchaser of a limited company including the tax-efficient write-down of inter company loans and the availability to claim capital allowances on a property held in the company.
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