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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.
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:
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.
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.
The best way to avoid an investigation is to be proactive about your tax compliance. Here are some of my suggestions:
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.
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
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.
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.
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.
Remember: This is not a time to DIY it.
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:
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:
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:
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:
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
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).
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:
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
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