We recently took on a client whom operate as a property improvement business, a property investment/development business, both as LTD companies, with both individuals associated to the businesses also having personal rentals to their names.
Their initial contact was that they felt their business/personal structure was not adequate enough for their expansion plans, for both businesses, and they didn’t know the current performance in terms of profits, corporation tax or personal tax.
The property improvement business came with several issues, firstly it didn’t have a sound accounting software. All the data was being inputted into Microsoft excel, which was held on a local machine. Holding the data locally gives rise to poor security and no data recovery as they did not have any backups in place.
The property investment/development also came with several issues. There was a mixture of property development and investment held within the entity. With property development there is always an element of risk – we have advised our client to (where possible) keep the development trade and investment separate.
We recommended Xero which has bought along its advantages such as online storage and automation through bank feeds and hubdoc for invoice uploads. We have also set our client up with automated emails out to their existing trade debtors listing, which, in the main has reduced down debtor days resulting in collecting monies faster.
With the use of Xero, and frequent data input and reconciliations, we have now presented to the client periodic Management Information (MI) which has resulted in clarity for the client in understanding the performance of the business.
With their respective wives having a role to play in the business, we have been able to make use of their unused personal allowance which has saved corporation tax and also personal tax, this has saved them thousands in tax.
From a personal perspective, with the interest rate restriction and general higher taxation as opposed to corporate, this has given our clients a differing approach to their future personal investments. With our client being higher rate tax payers, and not needing to extract any surplus funds from the personal investments, their approach now is to make use of the Investment Company that will result in lower taxation on the profits and lower taxation once sold.
Their plan to increase numbers will also be fruitful in cost savings, as we have illustrated with our 10 year plan and forecast we have calculated.
Overall, our client is delighted with the advice given along with the service provided to date, they can now see a clear pathway for their business and investment gains, ensuring their structure is strong enough to build upon.