Up early today to get ready to speak to a couple of hundred landlords and property professionals at the GB Landlords event.
Also up early because the rain woke me at about half four and of course lay awake until my alarm worrying I’d be getting a call from a tenant with a roof leak. Does anyone else have that? Anyway on to tax…
I met with a couple earlier this week that have gotten themselves in to a bit of bother. They bought an old pub are just about finished the conversion of the top floor in to flats and will hopefully be refinancing to get most of their money out.
They’ve been on a while and as soon as I spoke with them I started spotting issues. They’ve got a few of things wrong.
Despite asking the builder for the reduced rate of 5% the builder shrugged off the idea and simply charged them 20% anyway – mistake one was picking a dodgy builder who wasn’t experienced in this type of work! This has cost them the 15% difference as it cannot be recovered.
The second issue was they have recovered the VAT on the full development even though part is on pure residential work. You can only do this if you plan to sell the resi on when finished. This was not their plan. Mistake number two.
Their biggest mistake though was something else. You see they have an accountant that was doing their accounts and VAT returns for them. They didn’t spot either of these issues. When trying to establish the thought process of the current advisor I asked to see copies of any advice. There is none. Technically it will be extremely hard to put any blame on to an accountant that hasn’t given an opinion on anything!
So what happens now? Well I’ve explained it can be fixed but will more painful and more expensive than it would have been if done right from the start.
Now the final insult here is that they have massively overpaid their current accountant as well. They’ve spent slightly over £500 on a set of limited company accounts, a corporation tax return and a bunch of VAT returns.
Sounds cheap doesn’t it? How have they overpaid you ask? Well because the fees have been entirely wasted! They’ve had no support at all and have barely even had a “form filling” exercise from their accountant.
Each VAT return for instance was £60 and was normally with the client for signature within a couple of hours of dropping their records off. This despite there being hundreds of transactions. Absolutely no way could they have carried out any meaningful checks. The couple may as well have sent their figures directly to HMRC themself and saved the £60 😞