Introduction:

Through the magic of social media, we were contacted by a lady running an equestrian business. Her remit was, set up the business with cloud accounting, give an idea of her financial position, assist with HMRC set up, determine the need to become a LTD company, assess the requirement to be VAT registered and potentially provide ongoing bookkeeping services.

Background:

Client runs a livery yard alongside competing internationally in ShowJumping. The livery yard was originally a small affair run by a relative and passed to our client a couple of years ago with very little paperwork or guidance with regards to setting up and running a business. Operating in effect as a sole trader, but without having registered with HMRC, the client was very concerned at her legal position and potential tax implications and / or fines. As the business has grown substantially in the last few years, the client was also concerned for the need to become VAT registered.

The client had been invoicing clients through QBO and had a separate bank account from the date of takeover so would need these moved across onto Xero with purchases uploaded through Receipt Bank.

Key Points:

Everything to be brought into Xero

Bank Statements from 2018 to current.

Sales invoices from QBO.

Purchases from Dropbox

Bank to be reconciled from 2018 to current.

Assess the need for VAT Registration – The equestrian industry has some very grey areas regarding the requirement to charge VAT, so when assessing the need to register for VAT we first have to agree the portion of turnover which is not VAT exempt. The challenge with a livery business is that livery can be liable for VAT and it can also be VAT exempt depending on how the yard is set up and the business is run..

Register with HMRC as a sole trader – this was an urgent matter as the client was past the required date for registration.

File outstanding self assessments

Solutions:

Xero – Once set up we could activate a live link to the client’s bank account and upload all entries dating back to the first day of trading in 2018. The next step was to migrate the sales invoices across from QBO, which is a fairly quick and simple process and meant the client’s numbers were starting to take shape. Purchases were being stored in Dropbox so we uploaded them via Receipt Bank to complete the migration process into Xero.

Bank Reconciliation – This took some time, as entries dated back to mid 2018 and required some input from the client to get everything up to date and posted correctly.

VAT Eligibility – The most important task here was to identify all VAT taxable turnover which is defined by GOV.UK as ‘the total value of everything you sell that is not exempt from VAT’. Having had an equestrian business of my own I referenced VAT Notice 701_15 section 10.2 to establish that this business is offering stabling as an exempt supply of a right over land, therefore the whole livery package is exempt.

HMRC Registration – The client registered with HMRC and we assisted in the applications to have the overdue fines quashed.

Self Assessment – Having established that this business does not need to be a Ltd Company at this point in time, we proceeded to file outstanding self assessments to report the numbers as a sole trader.

Conclusion:

Fortunately having an organised client helped this set up immensely. Although the business had not been set up with a bookkeeping system nor registered with the correct organisations, rectifying this went very smoothly. Our previous experience in the equestrian sector and general knowledge of equestrian terminology, added to the ease of execution, posting entries to the correct nominal accounts and the assessing of VAT eligibility.

References:

HMRC Guidance – VAT Notice 701_15