Property development isn’t just about finding a top-quality location and watching the money roll in (hence why you’ve ended up here). It’s a complex investment game, and without the right finance in place, even the best-laid plans can crumble faster than a poorly built extension. Just like having to get the mix right and apply it correctly when building, you’ve got to do the research and find the right finance for the project when investing.

Finance is often the trickiest part of the process. You might have a solid vision, a great location, and a team of skilled professionals – but without funding, you’re stuck at square one. If I had £1 for every vision I’ve heard for a business or development I’d be a very rich man. Vision doesn’t pay the bills!

Let me break all of this down for you: why developers need finance, the challenges they face, and how to qualify for it.

Why property developers need finance

Unless you’ve got a bottomless pit of cash lying around (and if you do, why are you reading this?), chances are you’ll need external funding. Here’s where that money goes:

1. Buying land – Before anything else, you need a plot. And you know as well as I do that land doesn’t come cheap. And if it does, there is often a problem with the land such as it’s not suitable for building on!
2. Construction costs – Materials, labour, architects, surveyors, planning permission – it all adds up.
3. Professional fees – Legal fees, planning consultants, and project managers are all essential, but sadly they don’t work for free.
4. Marketing and sales – Once the project is complete, you need funds to get buyers or tenants through the door. After all, you’ve got finance to repay.
5. Bridging cashflow gaps – Developments rarely run like clockwork. Delays and unforeseen costs can throw finances off balance. (I’ve got a whole other blog post on how this can be avoided here).

Choosing the right type of finance

Different projects require different solutions. Here’s a breakdown of common financing options and when to use them:

• Land acquisition finance – If you’ve found an ideal plot but don’t have the funds upfront, land acquisition loans help cover the purchase. Lenders usually base the loan on the current value of the land rather than its potential developed value.
• Development finance – Ideal when you’re moving from planning to building. These loans cover materials, labour, and associated costs, usually released in stages as the project progresses.
• Bridging loans – A short-term option to fill funding gaps. Handy if you’re waiting for planning permission, selling another property, or refinancing a completed project.
• Refinancing – Once your development is complete, you might refinance onto a longer-term commercial mortgage or sell the property to repay the loan.

The right choice depends on your project stage, available funds, and repayment strategy. Mixing the wrong type of finance with the wrong project can cause serious problems down the line.

Common challenges in property development finance

1. Meeting lender requirements

Lenders aren’t handing out money for fun – they want assurances. They will pick apart:

• Your track record – If you’ve got experience, great. If not, you’ll need a solid team and decent money in the bank behind you. Or personal assets that you are happy to put up as a guarantee if anything goes wrong with your repayments.
• Feasibility of the project – They’ll want to see detailed financial projections, build schedules, and exit strategies.
• Loan-to-value (LTV) ratios – The amount you can borrow depends on the value of the land and projected development costs.

2. Managing cash flow

Even with funding in place, cash flow is a ballache. Late payments, unexpected costs, and market downturns can cause absolute havoc on finances. Smart developers keep contingency funds and secure multiple funding streams to stay afloat. A good rule of thumb is that you will always need more money than you think you will on a build.

3. Dealing with planning and regulatory hurdles

Nothing kills a development faster than planning refusals or compliance issues. Legal fees and delays can drain your budget before the first brick is laid. Always factor in time and money for planning challenges. Hopefully with the changes to the planning rules that are coming shortly it should make the planning process smoother with fewer delays.

How to qualify for property development finance

So, how do you convince lenders to loan you the money to get your project started? Follow these steps:

1. Build a strong application

Your funding application should be watertight, including:

• A detailed business plan – Outline the project, costs, timelines, and expected returns.
• Clear financial projections – Show lenders you’ve done the maths.
• An experienced team – Lenders want to know the project is in safe hands.
• Up-to-date management accounts (we can help you with this)

2. Keep a healthy credit profile

If your business (or personal) credit history is a mess, lenders will think twice. Pay down debts, settle outstanding liabilities, and ensure financial records are in order. Lenders aren’t going to be interested if you’ve still got an outstanding phone bill from 2014 – get it paid off.

3. Demonstrate a strong plan to repay the loan, i.e. your exit strategy

How will you repay the loan? Whether it’s selling units, refinancing, or renting, lenders need to see a clear and realistic plan. After all they are not a charity and want to see their capital repaid AND the interest due on it.

4. Provide a solid financial assurances

Lenders need reassurance that their money will get repaid. Offering collateral (such as property or land) increases your chances of securing finance.

Get your finances right, or get left behind

Property development finance is essential for most projects, but it’s not as simple as walking into a bank and asking for a loan. We all know the UK government doesn’t like to make these things easy for us. Understanding the challenges, preparing a strong case, and working with the right professionals can make the difference between a successful development and a living nightmare.

Do your homework, plan ahead, and keep your finances in check. And if you’re not sure where to start, get professional advice – before you find yourself knee-deep in a half-built project with no way to finish it.

Interested to find out more?

Call us on 01617 985789

Or book a meeting at https://calendly.com/d/ckfd-tzk-zbb

Over December, my pipeline of urgent, large projects was shuffled around like the hokey cokey. Deadlines shifted, priorities changed, and what was meant to be a well-structured schedule turned into something far more fluid. Frustrating? Yes. Unexpected? Not really. It’s the reality of working in industries where moving parts – both figurative and literal – dictate progress.

For construction business owners and property developers, shifting project timelines are unavoidable. Fact. The weather doesn’t care about your deadlines (especially in Manchester), materials don’t always arrive on time, and like anything that needs a ‘thumbs up’ from the government, regulatory approvals rarely move as quickly as you’d like. The result? Delays, rescheduling, and, if you’re not prepared, a big financial ball ache.

Why project timelines change in construction and property development

In the construction and property development industry, no matter how well you plan, there will always be variables you can’t fully control. Here are a few of the main culprits:

• Bad weather: Rain, snow, extreme heat – whatever the season, the UK finds a way of complaining and it can put a stop to outdoor work in an instant. Concrete can’t be poured in freezing temperatures, high winds can delay crane operations, and flooding can make a site inaccessible.
• Material delays: With supply chains still recovering from past disruptions, the arrival of key materials can be unpredictable. A delay in steel, timber, or specialist equipment can throw your entire schedule off.
• Labour shortages: Skilled tradespeople aren’t always available at short notice. If a job is pushed back, your best contractors might not be free when you need them again.
• Regulatory hold-ups: Planning permissions, inspections, and compliance checks often take longer than expected, and they don’t always move to your timetable.

When these issues hit, it’s not just a minor inconvenience. Shifting project timelines can lead to expensive problems:

• Contractors booked with nothing to do – yet still needing to be paid. We’ve all got bills to pay and families to feed. (My family member is a furry, four-legged one!)
• Hired equipment sitting unused, racking up rental costs.
• Late penalties from clients if deadlines aren’t met.

So, how do you protect your business from the strain of an ever-shifting timeline?

Strategies to keep your business resilient

While you can’t control the weather or force a supplier to deliver on time, you can put measures in place to reduce the impact of shifting schedules. Here are my suggestions:

1. Flexible contracts with contractors and suppliers

Where possible, negotiate flexibility into your agreements. Can your contractors agree to a notice period for scheduling changes? Can you negotiate material supply terms that allow for adjusted delivery dates without unreasonable penalties? If you can get these terms in writing before you need them, you’ll save yourself a world of stress later.

2. Staggered project planning

Rather than running projects back-to-back, leave extra time in your schedule. This gives you breathing room when delays hit. Yes, it might mean slightly longer timelines overall, but it can prevent bottlenecks that turn into costly problems. Thank me later.

3. Cash flow planning

A well-managed cash flow ensures that when projects are delayed, you’re not left scrapping about to cover wages and overheads. Keep a financial buffer for these scenarios. The last thing you want is to be in a position where a couple of postponed jobs risk your entire business going down the sh*tter.

4. Efficient resource allocation

If a project is pushed back, can you reallocate workers or equipment to another site rather than letting them sit about like a goalie on the bench? Having a plan for alternative work ensures that downtime is minimised and costs are kept under control.

5. Communicating early and often

Good communication with clients, suppliers, and contractors can make all the difference. If you know a delay is likely, notify everyone involved as early as possible. Clients appreciate being kept in the loop, and contractors who know what’s happening can make arrangements rather than sitting around waiting.

What I’ve learned from my own experience

Now, you might be thinking, “That’s all well and good for construction, but how does this apply to other industries?”

Well, the reality is that businesses in any industry – mine included – need to be prepared for shifting workloads and changing priorities. Here’s how I apply the same principles for Cloud Accountancy:

• Flexibility in scheduling: Client deadlines move, priorities shift, and urgent work appears out of nowhere. By keeping some flexibility in my schedule, I can adapt without compromising on service quality.
• Cash flow buffering: Just like a construction business needs a safety net, I ensure I have the resources to handle unexpected work spikes (like tax return season) or quieter periods.
• Clear communication: If a client’s timeline changes, I let them know what that means for them – and for me – so we can manage expectations together. We should all be on the same page.

In the end, no industry is immune to moving timelines. But if you plan for them, rather than just react to them, you can keep your business running smoothly, no matter what sh*t gets thrown your way.

Much like watching Man City play, running a business requires adaptability. You can have the best strategy in place – your own version of Pep’s game plan – but unexpected challenges will always pop up. The key is to stay calm, make smart decisions under pressure, and ensure your business (or your team) stays on track for success. Simple as that.

If you need help putting those strategies into action, give me a shout. We can have a chat about how I can help you and your business prepare for project delays.

Interested to find out more?

Call us on 01617 985789

Or book a meeting at https://calendly.com/d/ckfd-tzk-zbb

What goes into finding a large VAT reclaim?

Let’s not beat around the bush, sorting out VAT isn’t anyone’s idea of a good time (even mine). I’m probably not supposed to admit that as an accountant but you know me, brutally honest. VAT can be long-winded, fiddly and for many busy construction and property business owners, a task that keeps getting shoved further down the priority list until something goes wrong. Funnily enough, that’s the point at which I’m normally called in.

When I’m approached, it’s normally one of two reasons. Either someone had a go at handling VAT themselves and got it wrong, or they trusted someone who wasn’t up to the job. As a result, these are just a few of the situations that my clients are left in:

• HMRC’s knocking with a VAT inspection.
• Penalties have started racking up because of late or missed payments.
• Reverse charge VAT has been overpaid – again.
• VAT returns are missing or incomplete.
• Import VAT hasn’t been claimed properly, i.e. when buying windows or other materials – often because no one’s sure how to do it.

Construction and property VAT is niche and complicated. A general accountant or bookkeeper might mean well, but “well” doesn’t cut it when HMRC is involved. You need a professional with a decent amount of experience, who knows the industry like the back of their hand and won’t shy away from a run in with the tax man.

That’s where I come in.

The process of finding a VAT reclaim

As I’ve mentioned already, finding a large VAT reclaim is slow, disciplined work. There’s no opportunity for cutting corners. The books need looking at closely, the records often need rebuilding, it’s essentially a long process of sorting out what’s what. Sometimes it’s just a minor tidy up, but more often than not it’s straightening out the books and getting on the phone to HMRC. The sooner this is dealt with the better.

Step 1: Rebuilding the books

The first step is getting the records in order. Given the industry, my clients are mainly blokes, so I’m working with incomplete or messy records most of the time (sorry lads, but it’s not our strong point). In an ideal situation, I wouldn’t have to try to pluck invoices and receipts out of thin air or use the bank statement to identify what has happened, but here I am.

Then I’ll review every transaction to make sure it’s been logged and handled correctly for VAT. It’s worse than watching paint dry sometimes to be honest, but someone’s got to do it.

Step 2: Using tools to spot errors

Those that know me know that I’m a big fan of Quickbooks. Everything I need to get my clients straight is in one place. Cash flow, expenses, invoices, profit and loss – you name it. I can keep a close eye on it all, which makes it a hundred times easier to spot a c*ck-up (and sort it out).

Step 3: Reviewing purchases and sales

Something I see on the regular is transactions where VAT hasn’t been claimed because there’s no invoice. If the payment for a product or service that is VATable – and from a known company that is VAT registered – shows up on the bank statement, I’ll make the claim. Simple as that. There’s no need to be leaving (verifiable VAT) money on the table just because a piece of paper is missing.

So basically, my aim here is to make sure VAT has been applied correctly and reclaimable VAT hasn’t been missed.

A real-life example

One of my recent jobs started as a simple VAT clean-up. The client thought their returns just needed a once-over. What I found was that, unbeknown to my client, they were in a messy situation.

• PAYE hadn’t been done correctly, which meant the accounts needed to be restated.
• The company, which appeared insolvent, was actually trading perfectly well once the errors were corrected.
• The director’s loan account (DLA), previously showing a £40k overdraft, was actually £20k in credit. That alone saved the client from a nasty personal tax bill.

By the end of it, the client had a significant VAT refund, a more manageable tax bill, and a set of accounts they could trust.

Why it matters

VAT isn’t optional, and it isn’t simple – especially where construction and property development are concerned. Get it wrong, and HMRC will come knocking and it won’t be a gentle tap. Ignore them, and you’ll lose money. I can’t stress enough the importance of responding to HMRC as soon as possible. Delaying it will not only make matters worse, it will cost you more money in the long-run too.

You could also be missing opportunities for VAT refunds, like my client who had £20k sitting there unclaimed.

The moral of the story: don’t try to do VAT yourself if you’re not one hundred percent on how to. And don’t trust someone who isn’t experienced in your industry. VAT compliance takes time, knowledge, and the right tools. It’s not exciting, but it’s essential.

If you think your construction business could be sitting on a VAT reclaim and you’re unsure how to go about it, or even if you just need a hand with general VAT stuff, I’d be happy to help.

Interested to find out more?

Call us on 01617 985789

Or book a meeting at https://calendly.com/d/ckfd-tzk-zbb

We’ve all had those moments where everything seems to be going smoothly, then the rug gets pulled out from under you. For one of my clients, this rug was more of a carpet – a posh, expensive one – that had been soiled by years of neglect, bad luck, and some unfortunate decisions. The story starts with a bloke who had his head in the clouds, making more money than he could keep track of, but found himself in a right financial mess. If you’re in the property business, particularly dealing with VAT compliance, this might hit closer to home than you’d like.

Let’s set the scene: a successful property business owner who could easily pay his bills with his spare change, was too busy living the high life to bother with the donkey work, like his finances. If he needed something done, he signed the papers and moved on, trusting the details to take care of themselves. It worked – until it didn’t.

The vision was a hotel turned luxury block of flats in a prime spot for the ultra-wealthy. Two top-end penthouses, four slightly smaller ones, and then a collection of swanky apartments. He’d even secured a 12-month option on the hotel. The architect assured him planning permission was a done deal, so he forked out over £100k into getting the plans drawn up. With what he thought was planning permission in hand, he approached a funder who was ready to give him over £14 million. There was just one minor problem, the architect had jumped the gun. The planning permission hadn’t actually been granted, and the whole deal collapsed like a house of cards. In the thick of Covid. Just to make matters a hundred times worse.

And it didn’t end there. His books hadn’t been touched for four years, so reclaiming the VAT became a ballache. And I won’t even go there with the state of his personal and corporate tax affairs. Which brings me on to why VAT compliance is so important.

Why VAT compliance matters

VAT compliance might not be the most thrilling part of running a property company by all means, but it’s one of those things you’ve got to get right. Mess it up, and you’re looking at penalties, investigations, or worse. It’s not just about avoiding trouble, either. Proper VAT management can save you a fair amount of cash, especially when you’ve got big projects on the go.

Common VAT mistakes in property

When it comes to VAT, property companies often trip over the same issues:

1. Misunderstanding the option to tax: This is a big one. The option to tax can be a breakthrough in commercial property transactions, but if you don’t understand when and how to apply it, you’re setting yourself up for trouble.
2. Misunderstanding the difference in VAT rates: Depending on the form of property the VAT rates differ. New buildings tend to come with a 5% VAT rate, whereas for longer existing buildings it’s the standard 20% VAT rate. Then there’s extensions, which could be either.
3. Incorrect VAT treatment on sales and leases: Categorising supplies incorrectly – whether they’re standard-rated, zero-rated, or exempt – you best believe it’s going to attract HMRC’s attention.
4. Reclaiming VAT on allowable expenses: Many property companies miss out on reclaiming VAT on legitimate expenses, like construction and maintenance costs. That’s money left on the table.
5. Managing VAT in mixed-use developments: If your property has both residential and commercial elements, things can get tricky. Misallocating VAT in these scenarios can cost you dearly.
6. Missing VAT exemptions: From new builds to residential conversions, there are exemptions available. Not knowing about them or applying them incorrectly can result in big tax bills.
7. Errors in VAT on land transactions: Land transactions and leases are particularly tricky due to complex rules and specific circumstances. Knowing when VAT does and doesn’t apply will help you avoid costly errors with HMRC.
8. VAT registration mistakes: Many property companies fail to register or register too late and end up with penalties from HMRC. You must register for VAT if your taxable turnover exceeds £85,000 in a 12-month period.
9. Failing to keep proper VAT records: Poor record-keeping can cripple your VAT position. Without detailed records, how are you going to support your VAT claims or accurately report to HMRC?
10. Errors in partial exemption calculations: When dealing with both VAT-exempt and VATable supplies, partial exemption rules come into play. Incorrect calculations of recoverable VAT leads to potential over or under claiming. Get it right to avoid HMRC issues.
11. Failing to adjust for VAT on capital goods: Major refurbishments and equipment purchases fall under the Capital Goods Scheme. Neglecting to adjust your VAT returns can lead to incorrect claims and potential fines.
12. Ignoring the importance of timely VAT returns and payments: Making sure your VAT returns and payments are on time is essential. Missing deadlines means penalties and interest charges, which will affect your cash flow whether you like it or not. Using accounting software (I recommend Quickbooks), setting up direct debits, or working with an accountant will help you stay on track and avoid late payments.

Rebuilding the books

So going back to my client story, after the deal collapse and four years of neglected accounts, my client had to get serious about sorting his finances. We rebuilt his books from scratch, digging through old records, finding missing paperwork, and piecing together his VAT reclaim. It wasn’t glamorous work, but someone had to do it. By the end of it, we’d turned an initial VAT reclaim of £38k into a whopping £130k – money that made a real difference in getting him back on track.

But, as you can imagine, this level of reclaim didn’t go unnoticed. This is HMRC we’re talking about, of course it triggered an investigation. Thankfully, we’d done the legwork, ensuring everything was above board. The key takeaway? If you’re going to reclaim significant amounts of VAT, make sure your records are immaculate.

Putting safeguards in place

With his finances back in order, it was time to ensure he didn’t end up in the same mess again. So I had to lay out a couple of ground rules. Starting with the non-negotiable, no major financial decisions to be made without consulting me. He had to give Cloud Accountancy full say-so of his finance department. All bills are to be paid through Apron (no more relying on the wife!). And most importantly develop a cash flow forecast and solid business plan to keep everything on track.

Lessons learned

The biggest takeaway from this client’s story is that success isn’t just about making money; it’s about managing it well. Here are some lessons worth noting:

1. Don’t neglect your books: It’s tempting to let the paperwork pile up, especially when business is strong, but it will come back to bite you and it won’t be pretty.
2. Understand the rules: VAT is tricky to get your head around, but ignoring it only multiplies the problems. If you’re unsure, get advice from someone who knows their stuff (i.e. me!).
3. Keep records up to date: Whether it’s invoices, receipts, or bank statements, having everything in order can save you the misery if HMRC comes knocking.
4. Plan for the worst: Covid was a wake-up call for many business owners. Building financial resilience isn’t optional; it’s essential.

Final thoughts

VAT compliance might not be the most exciting topic, but getting it right can mean the difference between thriving and just about surviving in the property game. Don’t let poor record-keeping or a lack of knowledge catch you out. And if you’re already in hot water, do something about it now. There’s always a way forward, it might just take a bit of graft (and the right people in your corner) to get there.

Need help with your VAT affairs or just fancy a chat over a brew? Give me a shout. If there’s one thing I’ve learned, it’s that no problem is impossible with the right approach – and maybe a mini dachshund like Toto by your side for moral support.

Interested to find out more?

Call us on 01617 985789

Or book a meeting at https://calendly.com/d/ckfd-tzk-zbb

The Challenge

My client, let’s call him Dave, was pretty trusting with his money. He knew his accounts and bookkeeping were important. However, he left the financials to his other half, thinking all was ticking along fine and under control. By financials, I mean his wife ran his payroll, did his books and payments. In fact, there were many bank accounts that his wife was the only signatory for. After all, they were both in it together and wanted the same things. Didn’t they? 

But unfortunately, this wasn’t the case. As with many things, relationships often go well when the business and money is good. When Covid hit, many of Dave’s projects were put on a ‘stop’ and several large outstanding invoices were left ‘pending’. These were not the only serious issues Dave faced. He’d stopped looking at his finances and accounts. He just believed that his wife had it all in hand. His accounts were a mess and Dave didn’t know what he owed and how much he could take out of his bank account. A number of tax payments to the revenue had been missed and the brown envelopes were mounting up.

As you can imagine the pressure mounted up. As with many husband and wife teams, the relationship needs to be pretty strong to cope with a business under immense strain. Sadly for Dave, his wife decided to chuck him out and ask him for a divorce. I then get a very distressed phone call as Dave now realises that he hasn’t got access to his bank accounts and his wife is holding the dog and his passport as hostage until Dave agrees to her demands. By the way, no word of a lie, this part of the story is absolutely true. 

Oooops.

My approach

As an accountant with decades of experience of cleaning up messes often in hospitality and construction, you could call me an expert in this scenario. I will confess that sorting out husband and wife relationships are not my thing. But getting Dave back up and straightened out with the tax man and solvent again is my thing.

Here’s how I saved Dave and his firm from going under.

1. Sorted the mess:
   First things first, I needed to get a handle on Dave’s finances and believe me this was not a straight-forward job. But it rarely ever is. Often the starting point with situations like this is to go back to a point where we are confident that the accounts are correct. In Dave’s situation this was the last 7 years. My team and I then practically rebuilt the books from the ground up. Thankfully we were able to get copies of his bank statements, sales invoices and most but not all of his receipts and purchase invoices. I’ll say one thing for his soon-to-be former wife, she did put Dave’s business onto the cloud, which meant once we had gained access to the accounts, we had most of the information we needed. Then, we went through his accounts with a fine-toothed comb, highlighted the inconsistencies and started to plan out corrective measures. 
2. Dealt with the taxman:
   Tax issues? Yeah, he had them. Given that his accounts were, to put it simply, not a true and accurate reflection of his actual trading there were problems with VAT, CIS and his tax returns. When I had the accounts together I worked out what had or hadn’t been claimed and I put together a plan to get him square with the taxman. This is something we often do called ‘voluntary disclosure’. A voluntary disclosure means you are often on the front foot with the revenue and any fines levied are less than if the Revenue came after you. I’d like to say there were no fines involved. But I was able to plead significant mitigating circumstances – sometimes it is helpful for your wife to divorce you acrimoniously! These mitigating circumstances meant we were able to get a payment plan in place to make good the difference between the tax paid, the tax owed, the fines levied and what should have been paid. 
3. Got the cash flowing:
   Cash flow in a construction business should be like a pint of cold beer after work on a Friday – smooth and forward-moving. Sadly, it rarely happens that way. What was needed was a bit of breathing space for Dave. So, I restructured the business’s cash flow strategy by renegotiating payment terms with lenders, got a short-term loan agreed and got some of the outstanding large invoices paid. It’s amazing how menacing Toto barking in the background can sound when on the phone to ask for payment on behalf of a client. This not only improved cash flow but when the large outstanding invoices started to be paid restored the lenders confidence. Win-win!
4. Legal and debt management:
   With the tax issues came the legal headaches. Particularly with Dave needing to work out what his assets and income was as his wife’s divorce solicitor was going to be demanding this soon. Getting a new loan meant that Dave needed to take on more borrowing. However, we ran a cash flow forecast and looked at efficiencies within the business to ensure that Dave could pay back this loan AND also his other borrowings. We also needed to adjust the business shareholding so that his soon-to-be-ex-wife (who was resolutely not agreeing to shared access with the dog!!) no longer had any pecuniary interest or formal influence on the business. That took a little bit of delicate negotiation.
5. Continuous support:
   Lastly, it wasn’t just a case of fixing it and leaving. We’ve now got an arrangement that consists of us doing his bookkeeping, keeping a tight handle on his cash, and regular reviews to keep things on track and prevent future problems. After all, Dave needed a new finance department after he realised his wife had ‘resigned’ from that role!

The Result

With a bit of hard graft and some sharpness, we managed to turn it around:

• Dave dodged a large bullet with the taxman. Although his fines were much smaller than first thought.

• Got his cash flow moving again. 

• Saved his business and also removed his soon-to-be-former wife from his business affairs.

Key Takeaways

There’s several lessons learnt here:

• Stay in the know: Don’t leave your finances till the last minute. Keep your eye on the ball.

• • Don’t be too trusting. Always make sure that regardless of who is doing the invoicing, bookkeeping and payments that, you do regular reviews of what is happening.

• Get help before you’re in too deep: Got financial worries? Get hold of expert financial advice. There’s a time and a place for it to be handled amateurishly; dealing with HMRC is not one of them.

• Be proactive: Dealing with issues promptly prevents things from escalating. Definitely don’t ignore brown envelopes.

• Cash matters: Keep the cash flowing. No cash flow, no business.

Conclusion

Bad things happen, even to the best of us. But with the right accountants behind you, you can pull through anything—just like Dave did. 

So, moral of the story: Don’t be too trusting and if your finances are looking a bit off, don’t hesitate to give me a shout. Let’s get you sorted before the ref blows the whistle.

We’ve all had those moments where a letter drops through the letterbox and you instantly get that horrible sinking feeling in your stomach. For many construction business owners, that dreaded letter comes from HMRC. It’s a nudge letter, a not-so-subtle reminder that your tax affairs might not be as squeaky clean as you’d hoped.

Why the nudge?

Unfortunately, HMRC aren’t just sitting around twiddling their thumbs. Their advanced systems can spot a discrepancy a mile away, with accuracy. If you’ve been a bit sloppy in your record-keeping or missed a few deadlines, you might find yourself on their hit list.

Common reasons for nudge letters in construction:

• CIS antics: Errors in CIS returns or payments to subcontractors can trigger a nudge. It’s important to understand CIS and its complexities fully. If you need a hand with this give me a shout, alternatively, I’ve covered CIS in a previous blog. You can read it here.
• VAT issues: Incorrect VAT returns, especially for construction-specific schemes like the reverse charge.
• Income and expenditure mismatch: Discrepancies between your reported income and expenses.

A real-life example

One of my clients received a nudge letter from HMRC. At first, he was a bit flustered. After all, he’d been running his construction business for years and thought he had everything under control. But as I went through his records, I discovered a few minor errors that could have led to significant tax penalties.

If you know me, you know I’m not one to shy away from dealing with HMRC. So, I quickly got to work, reviewing his records, finding the errors, and communicating with HMRC to address their concerns. Luckily, thanks to swift response, we were able to resolve the issue with a slap on the hand and no major consequences.

Luckily, he had me (a tax professional that specialises in construction) at hand to handle it promptly. However, if you don’t already have an accountant I would strongly recommend following the steps below as soon as possible.

How to respond to a nudge letter

1. Don’t panic: It’s easier said than done, but it won’t change anything. So, take a deep breath and assess the situation calmly.
2. Seek professional advice: Consult with a qualified accountant, preferably with years of industry-specific experience, to help you understand the implications and come up with a strategy to get you out of the mess.
3. Gather your records: Gather all relevant financial documents, such as invoices, receipts, and bank statements. You know the drill.
4. Communicate with HMRC: Respond to HMRC promptly and provide any requested information. Don’t gatekeep anything or try to outsmart them, hand over whatever they ask for.
5. Consider a voluntary disclosure: If you’ve made significant errors, a voluntary disclosure may be a viable option. By doing this, you’re showing full transparency and cooperation with HMRC, which could work in your favour and result in reduced penalties and prevention of prosecution.

Remember: This is not a time to DIY it.

Avoiding future nudge letters

Construction is one of the most time-demanding industries, so falling behind on the financial side of things is something I see and deal with often. Making sure you set time aside each month to check your books are up-to-date will help to avoid a run in with the tax man. If you really don’t think you have time to do this, it probably means it’s time to look for an accountant that can take the weight off your shoulders.

To avoid future HMRC scrutiny, consider these tips:

• Keep accurate records: Maintain detailed records of all financial transactions. From paying subcontractors and employee wages, to purchasing materials and site expenses.
• File tax returns on time: Set reminders and consider using tax software to automate the process. My real preference is Quickbooks.
• Seek professional advice: Consult with a qualified accountant to ensure compliance with tax regulations.
• Stay updated: Keep ahead of changes in tax laws and regulations.
• Improve financial discipline: Establish effective systems to track income, expenses, and tax requirements.

Don’t forget, a timely response to an HMRC nudge letter can save you time, money, and stress. Don’t push it aside or ignore it, unless you want the situation and repercussions to escalate.

Consequences of ignoring a nudge letter

Ignoring an HMRC nudge letter can lead to serious consequences, including:

• Increased penalties: HMRC may impose hefty fines for late or inaccurate tax returns.
• Deeper investigations: A nudge letter can trigger a more thorough investigation into your tax affairs. You might not want them to see that pricey Christmas present that you got your other half in your expenses…
• Potential legal action: In severe cases, tax evasion can lead to legal action. Do you throw away all the effort and time you’ve put into your business by damaging your reputation?

Don’t let a simple oversight turn into a major headache. If you receive a nudge letter, take immediate action. Consult with a tax professional to understand the implications and develop a strategy to resolve the issue.

Need help with your tax affairs? Let’s chat over a cuppa.

Interested to find out more?

Call us on 01617 985789

Or book a meeting at https://calendly.com/d/ckfd-tzk-zbb

Where do I start? When it comes to finances, the construction industry is a bit like a Saturday night out after one too many pints – unpredictable, messy, and sometimes leaves you feeling a bit worse for wear. We all know that feeling.

As a construction firm owner, you’ve often got multiple projects on the go, each with its own unique set of challenges. Customers can sometimes be a right pain in the neck, especially with not paying invoices on time, and then there’s material costs that change more than the weather in Manchester.

And that’s not all… Trying to keep track of your finances on top of all that is enough to drive anyone up the wall. Construction is notoriously known for being a volatile industry. Things like delayed payments and cash flow inconsistency play a massive part in that. It’s also why it comes as no surprise that there’s a high failure rate in construction.

Here’s where I come in and essentially turn all your sh*t situations into roses. But first, let me explain how construction differs from other industries. Understanding this will highlight the importance of why choosing an accountant that specialises in this industry is essential.

Construction vs. other industries

Construction is in a category of its own. It faces completely different challenges to any other industry. Each project has its own individual problems and as a result, construction businesses often struggle to match the efficiency of companies that have more of a repetitive and controlled production, such as factories and certain types of office-based work. But, who wants to do the same thing day in and day out anyway?

Here’s are some of the key differences that you can expect from owning a construction-based business:

Variable costs – For materials, equipment and labour on each individual project. You’ll know from pricing jobs up that the costs vary, it’s not a one cost fits all type of thing.

Location – Construction often takes place at new locations with specific site conditions, each with their own set of challenges. You might well have to deal with local environmental and waste disposal regulations.

Suppliers – Having to rely on specialised suppliers for different projects can affect efficiency and cash flow. Such as, certain types of glass, lifts and escalators, steel beams, cladding etc.

Contracts – Construction contracts often include retainage, where some of the payment is withheld until project completion, even if specific work stages are finished. (Note: these can be negotiated before signing the contract).

Now that you understand the differences in construction in comparison to other industries, it’s time to look at what challenges you can expect to face as a result, and how I can help you overcome them.

Common construction challenges

Given these unique characteristics, construction businesses face several common financial challenges:

• Cash Flow Fluctuations: Irregular cash flow is a common problem due to delayed payments, upfront costs, and subcontractors.
• Cost Overruns: Projects can easily go over budget if costs are not carefully tracked and managed.
• Profitability: It can be difficult to accurately estimate and track profit margins on individual projects. Particularly when material costs go up significantly after you quote for the job.
• Debt Management: Managing debt can be challenging, especially during economic downturns. (A feeling we’re all familiar with thanks to Covid-19).
• Tax Compliance: Staying compliant with complex tax regulations, particularly VAT reverse charge scheme and CIS payroll is essential to avoid penalties and fines. (You need to be able to understand these tax regulations in order to stay compliant, but don’t worry I can help with this).

How I Can Help

I’m showing my age here, but as an accountant with decades of experience helping construction business owners, I can help you manage these challenges and improve your overall financial situation. Here are the things I would start with:

• Financial Analysis: I’ll provide a comprehensive analysis of your financial situation, including your cash flow, profitability, and overall financial health.
• Cash Flow Management: I’ll help you develop strategies to improve your cash flow, such as optimising invoicing and taking payments, negotiating better payment terms with suppliers, and looking at what your alternative financing options may be. (There’s not an array of financing options out there for construction businesses, but there are a few strings I could pull on).
• Cost Management: I’ll work with you to identify areas where you can reduce costs and improve your profitability. This could be renting equipment instead of buying it, or negotiating with subcontractors etc.
• Tax Compliance: I’ll ensure that you’re compliant with all relevant tax laws and regulations.
• Financial Planning: I can help you create a financial plan that aligns with your business goals.

In addition to all of the above, I’ll be on the other end of the phone whenever you need a bit of advice or just fancy a chat. Something I definitely won’t do is judge, so complete transparency is always encouraged. I’ll work with you so that as a team, we can transform your financial situation from, you guessed it – sh*t to roses.

Interested to find out more?

Call us on 01617 985789

Or book a meeting at https://calendly.com/d/ckfd-tzk-zbb

Taxman knocking? And not knocking quietly? Here’s how to handle an HMRC investigation:

Ever had that sinking feeling when you get that brown envelope with ‘HMRC’ written on it drop through your letterbox?

I experienced a similar feeling recently when I went to the doctor and was told I needed to change my diet. Seriously? The weekly Chinese was under threat! Gutted.

You know you should open the envelope. And you know it’s not an unexpected tax rebate. Of course, it could just be that an employee’s personal tax code has changed. But still that feeling of dread is real.

So, what do you do if the taxman is on your case and being a real pain in the backside? I’m no stranger to this topic, although I’ve learned over the years that everybody’s situation is different. Some are more challenging than others. But the one thing that doesn’t change is my advice on how to deal with it. So let’s get into it.

Understand Why They’re Here

Before you start responding to the taxman’s questions, try to work out exactly why they’re investigating you. Have you missed a deadline? Made a mistake on your tax return? Or is it something more serious? Once you know, you can start to prepare your response. Being honest with me is important when I ask you these questions. Trying to cover up stuff here with me or HMRC can just bring a whole heap of the brown stuff down on you.

Or maybe you already know the reason, and it’s just the inevitable catching up with you. In that case, it’s time to deal with it before it gets any worse. You don’t want to be caught standing in court with all the truth coming out? I’ve seen it happen, and it ain’t pretty. It’s pretty stressful if your case goes to court.

Regardless of whether you know the reason or not, here’s what I would suggest you do next:

Be Cooperative

It’s important to cooperate with the tax inspector. Answer their questions honestly and provide any documentation they request. I know it’s hard not to get your back up when you’re feeling accused of something, but try not to be too defensive. Remember, the more you cooperate, the easier the process will be for everyone involved. As your accountant, If I can show that you have been cooperative, this could reduce any penalties that the tax man wants to make you pay.

Seek Professional Help

If you’re feeling overwhelmed, consider seeking professional help. Get in touch with someone who knows their stuff. (Hint: I’m right here. I’m just a phone call away, and I wouldn’t judge.) An accountant can provide invaluable guidance and support throughout the investigation, even if it’s emotional support that’s needed. They can help you understand your rights and responsibilities, and they can negotiate with the taxman on your behalf.

A decent accountant should give you peace of mind, ensuring you’re compliant with tax laws and regulations. It’s important to choose wisely if you’re going down this route. Always do your research before you make a decision.

Proactive Measures to Avoid Investigations

The best way to avoid an investigation is to be proactive about your tax compliance. Here are some of my suggestions:

• Keep accurate records: This is the most important thing. Make sure you keep detailed records of all your financial transactions. The first thing I will want to do to help you – regardless of any HMRC investigation – is to get your books clean and up-to-date.
• File your tax returns on time: Don’t miss any deadlines. That’s a fine you do not want or need.
• Pay your taxes on time: Avoid late payments, as they can trigger an investigation and heavy interest charges.
• Stay up-to-date with tax law changes: Tax laws can be complex and change frequently. Make sure you’re aware of any changes that may affect your business. This is where I can help you. As your accountant, I will ensure that you are compliant with all the relevant tax laws, such as CIS and the reverse VAT scheme for the construction sector.

Remember, the taxman is just doing his job. If you’ve done everything by the book, you should have nothing to worry about. But if you’re feeling a bit anxious, I’m happy to offer you some advice. Sometimes crap does happen to good people.

Additional Tips:

• Don’t panic. It’s easy to get stressed when you’re being investigated, but staying calm is important. Take a minute to sit down with a cuppa and get rid of any anxiousness you’re feeling. You need a calm head for this stuff.
• Be prepared. Have all your documentation ready before the investigation begins. You don’t want to be flapping around trying to find letters or emails; it won’t look good.
• Don’t make any rash decisions. Just take your time; it’s important to consider all the options that are available to you. Take notes to look back on if necessary.
• Seek advice from a professional. A tax advisor or investigations specialist like myself can help you understand your rights and responsibilities and go about them the right way.

By following these tips, you can increase your chances of firstly avoiding a tax investigation in the first place and then getting a successful outcome in a tax investigation.

Interested to find out more?

Call us on 01617 985789

Or book a meeting at https://calendly.com/d/ckfd-tzk-zbb

Running a construction or hospitality business can be a complete and utter nightmare. You’ve got projects piling up, staff to manage, broken equipment and customers who seem to think paying on time is optional. But the biggest headache of all? Cash flow.

I’ve seen it first-hand. I’ve witnessed the stress of a dwindling bank balance and the fear of not being able to make payroll. Trust me, it’s not a fun place to be. But don’t worry, I’m here to help.

I’ve been in the construction industry for decades, and I’ve seen my fair share of ups and downs in my time. I’ve learned a thing or two about managing finances along the way, so I’m going to share my tips with you.

Separate Bank Accounts

First things first, set up separate bank accounts for your business. This will help you keep track of your finances and avoid mixing personal and business expenses. After all, you don’t want your accountant or bookkeeper to see exactly what nice presents you got for your other half. Let’s just say we’ve seen some ‘interesting’ personal expenditure when sorting out year end accounts. 

I recommend using Monzo banking, as they offer this handy feature called “Pots”. You can set aside money for specific things, like tax, rent, or, in my case a pot to fund my golf clubs (which by the way, if you’re not into golf, cost an arm and a leg!). I was recommended to Monzo and wondered what all the fuss was about, but I’ve learned it’s a pretty great app for keeping your finances organised. And, even if digital banking and apps isn’t your thing, it’s pretty easy to use. 

Getting Paid Promptly

Getting customers to pay on time is like trying to score a hat-trick against Man City – tough and often impossible, but there are a few things you can do to improve your chances (that’s with getting paid on time, not scoring against Man City – unless you’re Alan Shearer).

• Send clear and concise invoices: Make sure the details are correct and easy to understand. 
• No surprises: Your billing schedule or the details on the invoice should match what the customer is expecting.
• Set payment terms: Clearly state when you expect payment.
• Put your bank details on the invoice: You’ll be surprised how many invoices we receive where we can’t work out how or where to pay. If your invoice will be paid by direct debit, then state this on the invoice. If you want them to press the ‘pay now’ button, then put this on the invoice. You get the idea!
• Follow up: If a payment is late, don’t be afraid to chase it up. A friendly reminder via email or phone can often do the trick.

Cash Flow Forecasting

A cash flow forecast is a prediction of your future income and expenses. It’s a vital tool for any business, but it’s especially important in the unpredictable world of construction and the seasonally impacted hospitality sector. Projects are great as they are a large lumpy sum of money. But the problem is that projects often come with high upfront costs, i.e. to hire the equipment needed or buy the materials to get started.

Projects can get delayed, costs can shoot up out of nowhere, and we’ve already had a rant in this article, about how slow customers can be when it comes to paying. With a cash flow forecast, you can see these potential problems coming and take steps to avoid them. No more unwelcome surprises. 

Minimising Bad Debts

Bad debts can be another major drain on your cash flow. These are, more often than not, due to the long payment terms involved in construction. Of course, it is possible to have a bad debt with a hospitality business but in my opinion this industry is far better at taking payment either at the point of delivery or before an event. 

Here are a few tips for minimising your bad debts:

• Conduct credit checks: Before doing business with new customers, check their creditworthiness. Don’t just take their word for it. Companies House is a great place to snoop or pay for a credit check.
• Require deposits: Ask for a deposit upfront to reduce your risk. Particularly at the start of a project or before you need to buy materials or ingredients.
• Set clear payment terms: Make sure your terms are fair and reasonable, but don’t leave any room for doubt. I.e. these payment terms should be discussed at the point the contract is signed.

Payment Plans and Instalments

If a customer is struggling to pay, consider offering them a payment plan. This can help you avoid bad debt while still getting paid and it’s more manageable for the customer too, win-win. This option applies more for the construction industry rather than hospitality. Funnily enough we have a few payment plans currently in place for our clients who hit a tough spot trading wise. 

Keeping Your Books Up-to-Date

Keep your books in order. By doing this you can see who owes you money, when payments are due, and if you’re heading for some squeaky-bum time when it comes to your cash or money in your bank account.

I’m a big fan of QuickBooks. It means you can run your business from anywhere in the world as long as you have an internet connection. The QuickBooks software tools let you track your cash flow and keep your business running smoothly. But, the best part is saving time on sending invoices, tracking expenses, and preparing your VAT returns. All of the long, boring admin jobs that often get ‘forgotten’ about.

Splitting Finances by Project

Are you working on multiple projects? Do you know which one of these projects are loss making or the ones that are truly making you money? In my experience many construction companies and hospitality businesses don’t know. Everything gets lumped together on one or two lines of the P&L. 

In order for you to grow and put more money into your bank account you want to know which ones are bringing in the profits and which ones are costing you money. If you are a hospitality business you can do this by splitting the revenue lines on your P&L between items such as takeaway, table service or create reports using software to analyse which of your tempting desserts are working for your customers’ palates and your bank balance.

One of the reasons I like Quickbooks is it makes it easy to split up your expenditure and income on a project by project basis. This means someone like you or I can see very quickly which projects are underperforming and how to quote better next time.

To summarise

Firstly, don’t put your head in the sands when it comes to cashflow. The sooner you have a problem emerging the easier it is to deal with it. We are here to help you whether you are worried about cash flow or whether you know you have a cash flow crisis.

Interested to find out more?

Call us on 01617 985789

Or book a meeting at https://calendly.com/d/ckfd-tzk-zbb