Tuesday 23rd July, 2019

Case Studies

Case Studies

Below are some examples of our clients benefitting from our knowledge, experience and selected introductions to our trusted network of professionals:

Income Tax Saving - Incorporation
An established and successful Hotel operated as a partnership between two generations of a family.
The family were incurring significant levels of personal tax and wished to minimise these. At the same time, they were looking at planning forward for the succession of the business.

Red Dot recommended the transfer of the business from a Partnership to a Limited Company. The client’s previous accountant advised the client that this was not possible, so our client was understandably sceptical that we could do this.

We could understand why the previous accountant had taken the stance that they did, because this was a very complex process due to the valuations of the assets and ages of the Partners. During our work, Red Dot had to consider the implications on Income Tax, Corporation Tax, Capital Gains Tax, Value Added Tax, and Stamp Duty Land Tax, as well as Company Law requirements.

The end result was that we were able to incorporate the business, with the right structure for allowing future succession plans to be achieved, and obtain significant reductions in the tax liabilities – savings which the client immediately used to renovate many of the rooms in the Hotel.

We have experience of incorporating many businesses but this was the most complex and challenging we have undertaken. Our work was completed with the support of specialist tax and legal expertise from our network of trusted professionals, and our persistence and desire to help our client.

Income Tax Saving – Capital Allowances
A client who was a landlord with a small portfolio of commercial industrial units who told us they were considering selling the properties.

Red Dot advised the client that there was an opportunity to maximise income tax savings on the integral
fixtures and fittings within the fabric of the building. This was something the client was unaware of.

The tax saving arises from additional tax relief claimed called Capital Allowances. These are not normally available on property, but can be claimed on fixtures within the building itself. In order to quantify this it is necessary to undertake a detailed survey of the building to identify those integral fixtures within the building which can be claimed. This is a very specialised area so we introduced our client to a Capital Allowances specialist from our network of trusted professionals.

In this instance, the work had to be completed within a very tight deadline of two weeks in order to make full advantage of the tax savings for our client. Normally our consultants charge a fee based on a proportion of the savings, but in this case due to the deadline they worked on a fixed fee.

Our client was sceptical at first, and was reluctant to incur costs of over £2,000 with no guarantee of savings. From our experience we knew that whilst the quantity of savings could not be predicted with any certainty we were confident the client would make savings in excess of the costs.

Our client trusted us and authorised the work to proceed.

The end result was that we were able to make tax savings totalling in excess of £40,000 – a great result for our client and a real buzz to us that our client’s trust in us paid off so well.

Capital Gain Tax – Planning
Our client owned a Limited Company operating a manufacturing business, together with a number of commercial properties.

Our client had decided that they wished to retire and had received an offer for the business and all the commercial properties.

Red Dot reviewed the offer and calculated the Capital Gains Tax and Income Tax implications of the sale.
We then negotiated with the Purchaser to apportion the Sale Price more tax effectively for our client, and agreed for the sale to be spread over two tax years.

The result for our client was a significant reduction in both their Capital Gains Tax and Income Tax liabilities of in excess of £50,000.

Business Sale
Our client owned a manufacturing company and had decided to sell the business.

The sale of a business is something that few business owners have much experience of. It can be a very worrying and stressful time, during which the owner has to continue to run the business without being distracted to the detriment of the business.

From our experience at the outset we were able to advise our clients of the likely problems and pitfalls they would encounter – not just the practical and legal issues, but the emotional pressures too – so they knew what to expect.

Throughout the process Red Dot liaised with the Solicitors for both the sellers and buyers; negotiated changes in the structure of the deal with the Purchaser, and were able to support our client.
The result was a completed business sale, and a very satisfied client who received excellent post tax proceeds.

Raising Funds - Loan
Our client operated a Hairdressers and wished to relocate to expand the business.

They needed to raise funds from the Bank to allow them to complete the relocation.

Red Dot prepared detailed cashflow projections to show that the business was able to fund the loan repayment.
We also were able to promptly supply up to date Accounts to the Bank as these had already been completed well in advance.

As we know our client so well, we agreed that our costs would be reduced significantly if the funding application was not successful – we know how frustrating it is for clients if costs are incurred with no end result.

The result was that the bank agreed to lend the money to our client.

Raising Funds – Overdraft
Our client operated a manufacturing business which was growing and needed an increase in their overdraft facility to fund working capital.

Working to a very tight deadline, Red Dot prepared detailed projections to show that the business w as able to fund the increased overdraft.

We also were able to promptly supply up to date Accounts to the Bank as these had already been completed well in advance.

The result was that the bank agreed to lend the money to our client.

Company Purchase of Shares
A client company operated an IT business, and a minority shareholder was leaving the Company.

It was important that the outgoing shareholder’s stake in the business was bought off him as part of him leaving the business.

One way was for the remaining shareholders to buy the shares off the outgoing shareholder, but this would mean the remaining shareholders incurring higher rate tax bills on drawing funds from the company yo buy the shares.

Red Dot recommended the client arranges for the company to buy the shares instead. This is called a company purchase of own shares. The process is quite complex as the circumstances have to meet detailed criteria with HMRC, and the transaction requires HMRC approval.

Red Dot completed the transaction efficiently for our client.

Again, another example of how we can deliver services normally only associated with the larger accountancy firms by using our network of trusted professionals as we require them.

Business Purchase - Aborted
A client who operated a distributorship business had an opportunity to purchase a competitor business to allow them to expand into a new geographical area.

Our client asked Red Dot to undertake due diligence work as part of the acquisition. Due diligence is the process of checking different aspects of the business being acquired to ensure as far as possible that you are getting what you think you are getting.

We completed some preparatory due diligence work as well as providing advice to our client regarding the different ways to structure the acquisition whilst our client continued discussions with the target company.
Unfortunately, our client decided that a commercial issue had been identified that meant that the acquisition could not continue.

We understand this is a very frustrating time for our client, so the thought of professional fees being due as well was not nice, so we agreed as a goodwill gesture to write off all our costs to date.

We were able to do this as we have a very close working relationship with this client, and unlike many other accountants, have the flexibility within our own business to do this.

VAT Registration
A retailer client had exceeded the threshold for VAT registration.

Red Dot advised the client on the turnover threshold for VAT registration, and calculated the date registration was applicable from. We then registered the business for VAT with HMRC.

Our client asked us to complete the first VAT Return on their behalf, as we had advised them that VAT incurred before the date of registration could be reclaimed on the first Return.
Using our detailed knowledge and experience, we completed the Return, and were able to reclaim input VAT incurred before the date of registration of over £4,000 – which the client would not have claimed had we not told him.

Result – a very happy client!

Working Capital – Tailored Invoice Discounting
A manufacturing company was experiencing cashflow difficulties due to their growth, and specifically the slow payment from one major customer.

Our client had approached their Bank for increased overdraft facilities, but were declined.
Red Dot suggested they consider invoice discounting or factoring – this is where a finance company will advance up to 85% of the value of a sales invoice as it is raised without having to wait for the customer to pay.

Our client had considered invoice discounting or factoring, but had felt this was not an option as their other customers paid promptly so they did not want a facility to include all customers.

Red Dot introduced them to an Invoice Discounting Broker – at no cost – who identified a specialist invoice discounter who was able to offer facilities for this sole customer.

The client had a meeting with the firm, and agreed to use the services of the invoice discounter.

The result was a major improvement in their cashflow and a very happy client!

This is yet another example of our client’s benefiting from our knowledge and experience, and introductions to our trusted network of professionals.

Working Capital – Invoice Discounting
A client company specialising in workwear was experiencing cashflow difficulties due to their continuing growth.

Our client had approached their Bank for increased overdraft facilities, but were declined.
The company had an existing invoice discounting facility but were feeling that they were being charged too much, and the service being supplied was poor.

Red Dot were able to introduce them to an alternative invoice discounting company.
The client had a meeting with the firm, and agreed to use the services of the new invoice discounter.
The result was a major improvement in the service provided, and a more cost effective solution – and a very happy client!

This is yet another example of our client’s benefiting from our knowledge and experience, and introductions to our trusted network of professionals.

Tax Planning – Childcare
A client company operating an energy brokerage, was managed and owned by a young couple who were incurring significant childcare costs in their local nursery.

Red Dot recommended a tax efficient way for the client to fund nursery fees.

We were able to introduce a specialist Childcare company who implemented a Childcare Scheme in the Company.
By using our specialist knowledge and skills, we were able to get our client tax benefits equivalent to two tax years in the first year – saving them over £5,200 in tax.

See www.childcaretaxsavings.co.uk for more details.

If you recognise your situation within these case studies and feel you should be getting more from your current accountant, perhaps its time you contacted us.

Is it time to change your accountant?

By now you should be getting an idea how we work at Red Dot.

If you are still unsure if we are the right accountants for you, then why don’t you get in touch… we don’t bite!

As we do not want to waste your time, we will Initially speak over the phone to get a ‘feel for each other’ to see if we sound like we could work well together.

Assuming we both feel comfortable, we can then arrange to meet up for an informal chat over a cup of tea or coffee.

Our conversation and meeting will be totally FREE, confidential, and without any further obligation.

We are confident that you will get some benefit from our meeting irrespective of whether you appoint us or not.

As a minimum we expect you to get an independent view on your business performance and tax affairs, with suggestions on how you could improve these, plus as a special gift we will give you a free copy of our book.

CONTACT US NOW – you have nothing to lose