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Case Studies

Mark Harvey - Case Study

Originally the client came to Mark Harvey for help with a tax return relating to property rental income. A very straight forward piece of work. Once completed, the client asked whether Fuller Spurling undertook business valuations and advised on business acquisitions. The answer, in both cases, was: “Yes, we have a lot of experience in both.

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The client was one of three managers in a successful business involved in media and operated by two companies. The original owners now wished to retire and offered the managers the opportunity to buy. Having demonstrated how the practice could help, the clients signed up Fuller Spurling to assist them with the acquisition.

It was a difficult type of business to evaluate but Fuller Spurling were able to confirm that the asking price was a very fair price.

Fuller Spurling was not only able to help with the acquisition but also assist the directors in the proper running of a business. The three potential new owners, while experienced managers, had had little or no involvement in the finance or overall running of the business.

To give the clients confidence to go ahead, Mark’s team produced cash flow and profit forecasts and budgets to assist with arranging the most appropriate loans, and invoice financing options. A three-year plan was drawn up with supporting notes and assumptions for presentation to banks and other parties. Fuller Spurling are good at such plans, building in ‘what if’ scenarios.

As well as advising on the structure of the new company and shareholding, Mark also enabled the new owners to save substantial amounts of tax and National Insurance by recommending that they take dividends rather than salary. His advice saved the new business around £20,000pa.based on their existing pay packages.

Other advice included producing monthly management accounts incorporating complex work in progress; training the client to undertake their own quarterly reports and accounts; help with a new bookkeeper; new Sage software at discounted prices, plus training on Sage and reporting processes that would provide necessary and accurate information to support business decisions.

Mark’s team also helped to set up Board Meetings, formal agendas, minutes, etc and then attended these for several months. As a consequence, Fuller Spurling was able to save the business thousands of pounds; for example they advised the owners to use local Health and Safety advisors rather than expensive national companies and thereby making considerable savings.

Fuller Spurling also have a continuing role helping to prepare Year End Accounts, tax and tax planning; providing support at the level their client needs, being on call to help and give advice where required.

Working alongside many clients in this way, Fuller Spurling take the stress and worry out of accounting procedures: they look for tax saving opportunities; ensure clients don’t miss important deadlines thus avoiding possible fines; and continue to work with businesses to try to ensure that they can become as self sufficient as possible – leaving Fuller Spurling to handle those matters which the client is not able to do.

Sue Keane - Case Studies

1. Sue Keane recently took on a Limited company case from a sole practitioner who had fallen ill, and whose subsequent death had left much work undone; some tax planning had been done, but not followed through, the accounts were overdue and there was a tax bill from HMRC. With no idea what is was for the director was unclear whether or not to pay the bill.

Working from incomplete records, Sue has now sorted out the accounts, established corporate and personal tax liabilities, and records are now up to date. She also restructured the company to improve tax efficiency and reflect the realities of this growing business. These particular clients like the fact that Fuller Spurling is local, and if they pop in with a query or to sign something, there is always someone available to help them.

2. Another client, previously a sole trader, had been advised to incorporate by his previous accountant. He understood that this would be tax efficient but did not understand the other implications - for instance his business was now a separate entity from him and therefore could not be treated as his personal bank account!

The client’s house was also involved in his business creating tax problems and there were also VAT issues to deal with. Fuller Spurling took over the company and personal tax affairs, dealt with Goodwill valuation, Capital Gains Tax issues, the accounts and other taxes. To help the client, who is keen to understand all the issues, Sue is now educating him about how companies work and the interaction between the different taxes.

Patrick Hope - Case Studies

1. Tax enquiries

Fuller Spurling are handling a greater number of tax enquiries and whilst HM Revenue & Customs (HMRC) conduct most enquiries in a thorough but professional manner the practice is sometimes required to defend clients from unreasonable actions of HMRC. Patrick Hope is presently recommending that one of his clients take legal action against HMRC in respect of what Patrick perceives as an infringement of his client’s human rights; Counsel’s opinion will need to be obtained to determine whether this is worth pursuing.

Recently, Patrick was asked by a client to assist with a tax enquiry being initiated by HMRC into capital gains reported upon the Tax Returns of the client and his wife in a prior year. Before responding to the lengthy enquiries Patrick asked HMRC to confirm why they felt entitled to initiate enquiries outside of the time permitted by statute. The response received was that full details of the capital gains had not been reported upon the Tax Returns and HMRC felt entitled to raise the enquiries under the “discovery” provisions.

As their tax affairs were not complex, the client had prepared their own Tax Returns, which Fuller Spurling had posted while Patrick had produced the Capital Gains pages so he knew well what had been reported. He reverted to HMRC asking them to explain what, in their view, were the mistakes and enquired whether there might have been some data mis-posting by HMRC staff. The aggressive response from HMRC suggested that Patrick was in some way preventing his client from paying the correct taxes and expressed annoyance that it should have been suggested that HMRC staff might have been in error; from the response it was clear that the original forms had not been checked before the enquiry commenced. Within days of receiving the letter, HMRC called Fuller Spurling and admitted an error in capturing the data in the Tax Returns and confirming that the enquiries would be closed as the details had been correctly reported.

2. Business advice

Patrick is currently engaged in assisting a TV personality with a business venture that she is setting up with her husband. In addition to advising upon the tax issues arising from the business structure and the anticipated income and expenditure Fuller Spurling has produced the financial data that the bankers will need in order to provide funding. The initial projections prepared by Fuller Spurling highlighted a potential flaw in the business strategy and once this was addressed the venture became more viable.

Fuller Spurling also dealt with VAT Registration and the obligations upon the business arising from engaging staff.

While requiring significant involvement by Patrick and his colleagues, it took pressure off their client allowing her to concentrate on her “day job” and, hopefully, cemented a long-term trust in their ability.

3. Estate planning

Patrick has just completed a pro-bono piece of work for a couple whose mentally incapacitated child died at 15 years of age. Because the incapacity was due to medical neglect, an award had been made to the child to enable an improved quality of life; this had been used to purchase and convert a house suitable for his care. On his death, the son’s interest in the property passed to his parents who had been living there to provide for his care. They were then faced with an unexpected Inheritance Tax (IHT) liability that had to be met before they could take the property. Unable to finance the IHT liability, the parents had to sell the property to pay the full amount due.

Patrick was able to get the IHT liability reduced as the property had lost value since the death of their son. Their local MP is now approaching HMRC to see whether any further mitigation of the IHT burden is possible.

4. Capital taxation mitigation

Patrick has assisted a client with the disposal of his significant financial business prior to 5th April 2008 so that he benefited from the more favourable capital gains tax (CGT) relief, available under the previous CGT rules. Business asset taper relief meant that he only paid CGT at the rate of 10% on the disposal of the shares in his company and the current 10% rate on the first £1m of chargeable gains arising from Entrepreneurs’ Relief post-5th April 2008 would not have compensated for the tax reduction achieved by a pre-5th April 2008 disposal.

The arrangements were complex and involved Trust planning. The IHT implications also had to be considered.