Business Problems Create Personal Problems

Building a house

This week I want to explain how business problems create personal problems. I had a meeting on Wednesday afternoon with Niall. There was one major thing he wanted to achieve in the next few years. And it wasn’t a business goal but a personal one. It got me thinking about how the business interacts with the personal. More of that later. Let’s talk a bit more about our meeting and focus on

  • Niall’s background
  • Issues he’s having
  • Positives
  • Can we help?
  • Personal Goal
  • Summary

Niall’s Background

Niall is mid-30s, single, and has 4 children. He’s a carpenter and has two lads working for him. One is qualified and the other is an apprentice. He’s renting a house in Co. Wexford. There’s plenty of work on and he mainly works for a couple of quality builders doing one-off houses. Being good at what he does he’s in demand and there’s a strong pipeline ahead.

Life is hectic for Niall between work and the kids. Busy juggling everything and next thing he gets a letter from Revenue. That’s the reason for the meeting. He’s worried and knows that things have got to change.

Issues he’s having

The main business issues he’s having are all Revenue related. The letter from Revenue told him he needed to register for VAT. He’s had another brush with Revenue over RCT and now they started to deduct 20% RCT again. This is impacting his cash flow. But there’s another more serious issue that needs sorting too. His invoicing. Like the Ed Sheeran song, he’s got some bad habits.

“My bad habits lead to………..conversations with a stranger I barely know”

It hurts me to include a lyric from Ed Sheeran here, but I couldn’t think of another song called Bad Habits!

Among the issues he’s having are


The main builder he works for owes him a “good chunk” of money and they are discussing this now. But do you not invoice for all the work you do? No. The builder pays him €2,500 most weeks but some weeks it could be €3,500. Niall knows he has done more work than he got paid for. In his words there’s a lot of trust between the two of them, so they’ll sort it out.

Not invoicing correctly exposes his business to not getting the money for work done. Say he does the carpentry work on 5 houses at €30k per house for a total of €150k. But he gets €2.5k a week for 52 weeks which is a total of €130k. Well, then he’s short €20k. That’s €20k that should be in his bank account but is in the builder’s one. That’s 20k of profit that coming off his bottom line.

Niall agrees the price for each house up front so that’s a very positive start. After that, he needs to get into the habit of raising invoices for stage payments along the way. That protects him. He’ll know what he has billed and what the builder owes him for each house. Plus, it’s good for the builder too. He has the proper invoices for his accounts and knows he has paid and owes to Niall.

VAT Registered

Given the numbers mentioned above Niall should be VAT registered. Revenue know this too and that’s what the letter was about. Plus, the reason for the RCT deduction of 20%. His turnover is well over €100k and the registration threshold is €40k.

Once he’s VAT registered most of his invoicing will be on a reverse charge basis. With that, he won’t charge VAT but will be able to claim VAT back on his costs. Once in the VAT net, he’ll have to up his game when it comes to the paperwork he keeps, or else he’ll miss out on the VAT he can claim back.


Even writing this I know it will make our payroll specialist Izabela squirm with anxiety. The usual. No payslips and paying his two employees net each week. The qualified guy gets €750 into his hand and the apprentice €375. So, payroll is not done right, or is it? We don’t know. He sends a text to his friend who works in an accountancy office every week with the amounts he pays each employee.

Both employees don’t have contracts. Another issue that needs sorting!


RCT stands for Relevant Contracts Tax and is a tax in specific industries of which building is the main one. Say builder Tom Dunne got the job to build Simon Harris’s new house. Tom is the principal contractor. Tom engages Niall and his lads to do the carpentry work on the house. Niall is a subcontractor.

With RCT any time Tom pays Niall he must confirm this to Revenue and check the RCT deduction rate to apply. The deduction rates are

  • 0%
  • 20%
  • 35%

If the rate is 0% then Tom pays Niall the full €2,500. If it’s 20% then Tom pays Niall €2,000 and pays Revenue €500 RCT. Assuming Niall is tax compliant and there are no red flags with Revenue his rate will be 0%. But stuff like outstanding tax returns and not being VAT registered are red flags. Big huge red flags like the Ferrari one you’ll see at the Formula One! That’s why Niall’s current RCT rate is 20% and Revenue have his money. With the numbers Niall mentioned, that’s in the region of €20k to €30k per annum.

Tax Returns

Niall has a few tax returns outstanding. I asked him about the last set of accounts he has. After a blank stare into space, he’s not sure and it looks like he never had a set of accounts. His friend in the accountancy office sorted a few returns out for him a couple of years ago. It’s all very vague as he just doesn’t know where he stands. All he remembers is that he had a lot of RCT built up at the time and Revenue took it all.

The less said about this the better. Like the Grim Reaper, I mentioned the 10% surcharge he’ll have to pay on top of the tax liability that he has each year. On the plus side, he wasn’t aware of the single-parent tax credit or the rent credit. Combined that would be worth up to €3,000 per annum to him to help reduce the tax liabilities.


It’s not all doom and gloom for Niall as he has one major positive. That’s his business. He works hard. And takes pride in the work he does. The business turns over between €2.5k and €3.5k per week and there’s plenty in the pipeline. Niall needs help to make sure everything is ok with the finances, so he knows where he stands. Behind all the carnage is a quality business, so that’s the major positive to start with.

He knows that he can’t keep doing things the way he’s doing them. That’s why he’s talking to the stranger in front of him. The second positive. He wants to change. But can we help, and do we want to?

Can we help?

Yes, we can help. Despite being up the walls with plenty of work. Like most of the country, I hear you say! He’s the sort of guy you’d warm to. A hard worker but a family man too, who takes great pride in his kids. He knows he has made a mess of some things but isn’t blaming anyone else but himself. There are two lots of work as far as I see it.


The first thing is to get a proper bookkeeping process in place for him. This will involve the following

  • Give him a manager here that is his main point of contact
  • Register him for VAT from the 1st of March
  • Set him up on Xero & Dext with training
  • Get him set up on Collsoft – our payroll software
  • Introduce him to an HR contact to get contracts in place

Getting the process right will take time and investment over the next few months. Once he’s committed to it, he will see the benefits but it’s not an immediate flick of the switch miracle. It takes time and effort.


The second piece of work is the tidy-up. Get a look at his Revenue record and see what tax returns are outstanding. From our point of view, his business is reasonably straightforward. He has two bank accounts, and he says everything goes through them. He doesn’t buy materials for jobs, so it’s labour. Niall’s equipment is a van, and after that, tools, insurance, phone, and van running costs.

Benefits for Niall

The main benefit for Niall is that he’ll have a team of people  helping him with his business. The people he’ll have available will include

  • A manager who will be looking after him
  • A payroll specialist
  • A tax guy
  • An accounts partner to review the numbers
  • An office manager

This will get him to a place where he’ll

  1. Have tax clearance
  2. Reduce his RCT rate to 0%
  3. A proper payroll system in place where his employees get payslips every week
  4. A bookkeeping system in place with VAT, PAYE, and RCT all up to date
  5. Year-end accounts are done on time
  6. Tax returns up to date

For him, it will be a weight off his shoulders. Peace of mind knowing that everything is looked after. And if Revenue come calling then he has nothing to fear.

Personal Goal

Niall’s business problem creates a personal problem. Niall’s personal goal is to buy a house. But the way his business is, he’s miles away from achieving that. We’d love to help him to achieve that goal. He’ll need to show good profits as the bank won’t give him money unless they know he can pay it back. Up-to-date accounts, tax returns, and tax clearance are all part of the mortgage process. This will help him get a mortgage from one of the main lenders and a lower interest rate.

He’s been renting for a long time now and his rent is affordable. But he wants a house for him and his kids. I know that feeling as have been in the same boat as Niall. We’d get great enjoyment and satisfaction helping him to achieve that. And we’d get paid for doing the work we love doing.


Being in business can be a lonely experience at times. Thousands like Niall are working hard and earning good money. But they never learned how to run a business. The importance of getting the numbers right and keeping Revenue onside. Having a good relationship with your accountant is vital. Someone you can call on before you make a business decision. Knowing there’s a team there that wants to help you will give you peace of mind.

While business problems create personal problems, a business solution can create a personal solution too. Just like the houses that Niall helps build, his business needs strong foundations.

Do you need help with your business? If so, start here