Company Registration No. 14243728 (England and Wales)
Exchequer Contracts Ltd
Annual report and financial statements
for the period ended 31 December 2023
Exchequer Contracts Ltd
Company information
Directors
J Barrowcliffe
Jon Barrowcliffe
R Kavanagh
S Kavanagh
Carol Mitchell
M Mitchell
Michael Lowndes
Company number
14243728
Registered office
1st Floor, The Exchange
1 St John Street
Chester
CH1 1DA
Independent auditor
Saffery LLP
Trinity
16 John Dalton Street
Manchester
M2 6HY
Exchequer Contracts Ltd
Contents
Page
Directors' report
1 - 2
Directors' responsibilities statement
3
Independent auditor's report
4 - 7
Statement of income and retained earnings
8
Statement of financial position
9
Notes to the financial statements
10 - 13
Exchequer Contracts Ltd
Directors' report
For the period ended 31 December 2023
1
The directors present their annual report and financial statements for the period ended 31 December 2023.
Principal activities
The principal activity of the company is that of providing commercial services to recruitment agencies and contractors across a range of sectors.
Directors
The directors who held office during the period and up to the date of signature of the financial statements were as follows:
J Barrowcliffe
Jon Barrowcliffe
R Kavanagh
S Kavanagh
Carol Mitchell
M Mitchell
Michael Lowndes
Going concern
Exchequer Contracts Ltd (‘ECL’) requires support from its parent company, Exchequer Solutions Ltd (‘ESL’), to continue as a going concern.
ESL has been in dispute with HMRC for a number of years over the tax treatment of expenses during a period 2013/2014 to 2016/2017. The dispute centres around whether ESL had an overarching contract of employment with its employees or not, which in turn would determine the correct tax treatment of expenses paid to the same employees.
HMRC issued determination against ESL which were subsequently appealed by ESL with the appeal heard in May 2022 at a First Tier Tax Tribunal (FTT). The tribunal found in favour of HMRC on the principle points. ESL appealed the FTT decision to the Upper Tier Tax Tribunal (UTT) which was heard in November 2023. The UTT dismissed ESL’s appeal in January 2024.
ESL is due to commence the quantum discussions with HMRC in the first quarter of 2024 in line with the FTT directions.
As a result of these matters there is a material uncertainty that may cast doubt upon the group’s ability to continue as a going concern and therefore whether the group will realise its assets and settle its liabilities in the ordinary course of business at the amounts recorded in the financial statements.
In response to these matters, the Directors are taking the following actions, including but not limited to, negotiating with HMRC, and sourcing funding for the payment.
In addition, ESL continues to trade well and is supported by financial forecasts and cash flows having the ability to support ECL.
Although it is not certain that these efforts will be successful, management has determined that the actions that it is taking are sufficient to mitigate the uncertainty and has therefore prepared the financial reporting on a going concern basis.
Exchequer Contracts Ltd
Directors' report (continued)
For the period ended 31 December 2023
2
Statement of disclosure to auditor
So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.
Small companies exemption
This report has been prepared in accordance with the provisions applicable to companies entitled to the small companies exemption.
On behalf of the board
Michael Lowndes
Director
28 March 2024
Exchequer Contracts Ltd
Directors' responsibilities statement
For the period ended 31 December 2023
3
The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law).
Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Exchequer Contracts Ltd
Independent auditor's report
To the members of Exchequer Contracts Ltd
4
Opinion
We have audited the financial statements of Exchequer Contracts Ltd (the 'company') for the period ended 31 December 2023 which comprise the statement of income and retained earnings, the statement of financial position and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
In our opinion the financial statements:
give a true and fair view of the state of the company's affairs as at 31 December 2023 and of its loss for the period then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material uncertainty related to going concern
We draw attention to the directors report and Note 1.3 in the financial statements, which indicates that the company requires support from its parent company, which itself is subject to a HMRC dispute and subsequent payment. The directors are taking relevant steps to mitigate the costs to parent company and to seek sources of funding to settle the claim from HMRC.
As stated in directors report these events or conditions indicate that a material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Exchequer Contracts Ltd
Independent auditor's report (continued)
To the members of Exchequer Contracts Ltd
5
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the directors' report for the financial period for which the financial statements are prepared is consistent with the financial statements; and
the directors' report has been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the directors' report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
certain disclosures of remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit; or
the directors were not entitled to prepare the financial statements in accordance with the small companies regime and take advantage of the small companies' exemption in preparing the directors' report and from the requirement to prepare a strategic report.
Responsibilities of directors
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Exchequer Contracts Ltd
Independent auditor's report (continued)
To the members of Exchequer Contracts Ltd
6
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The specific procedures for this engagement and the extent to which these are capable of detecting irregularities, including fraud are detailed below.
Identifying and assessing risks related to irregularities:
We assessed the susceptibility of the company’s financial statements to material misstatement and how fraud might occur, including through discussions with the directors, discussions within our audit team planning meeting, updating our record of internal controls and ensuring these controls operated as intended. We evaluated possible incentives and opportunities for fraudulent manipulation of the financial statements. We identified laws and regulations that are of significance in the context of the company by discussions with directors and by updating our understanding of the sector in which the company operates.
Laws and regulations of direct significance in the context of the company include The Companies Act 2006 and UK Tax legislation.
Audit response to risks identified
We considered the extent of compliance with these laws and regulations as part of our audit procedures on the related financial statement items including a review of financial statement disclosures. We reviewed the company's records of breaches of laws and regulations, minutes of meetings and correspondence with relevant authorities to identify potential material misstatements arising. We discussed the company's policies and procedures for compliance with laws and regulations with members of management responsible for compliance.
During the planning meeting with the audit team, the engagement partner drew attention to the key areas which might involve non-compliance with laws and regulations or fraud. We enquired of management whether they were aware of any instances of non-compliance with laws and regulations or knowledge of any actual, suspected or alleged fraud. We addressed the risk of fraud through management override of controls by testing the appropriateness of journal entries and identifying any significant transactions that were unusual or outside the normal course of business. We assessed whether judgements made in making accounting estimates gave rise to a possible indication of management bias. At the completion stage of the audit, the engagement partner’s review included ensuring that the team had approached their work with appropriate professional scepticism and thus the capacity to identify non-compliance with laws and regulations and fraud.
There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Exchequer Contracts Ltd
Independent auditor's report (continued)
To the members of Exchequer Contracts Ltd
7
Diane Petit-Laurent FCA
Senior Statutory Auditor
For and on behalf of Saffery LLP
28 March 2024
Chartered Accountants
Statutory Auditors
Trinity
16 John Dalton Street
Manchester
M2 6HY
Exchequer Contracts Ltd
Statement of income and retained earnings
For the period ended 31 December 2023
8
Period
ended
31 December
2023
£
Turnover
274,164
Cost of sales
(271,142)
Gross profit
3,022
Administrative expenses
(11,575)
Loss before taxation
(8,553)
Tax on loss
Loss for the financial period
(8,553)
Retained earnings brought forward
Retained earnings carried forward
(8,553)
The income statement has been prepared on the basis that all operations are continuing operations.
Exchequer Contracts Ltd
Statement of financial position
As at 31 December 2023
31 December 2023
9
2023
Notes
£
£
Current assets
Debtors
4
9,331
Cash at bank and in hand
12,320
21,651
Creditors: amounts falling due within one year
5
(30,203)
Net current liabilities
(8,552)
Capital and reserves
Called up share capital
1
Profit and loss reserves
(8,553)
Total equity
(8,552)
These financial statements have been prepared in accordance with the provisions applicable to companies subject to the small companies regime.
The financial statements were approved by the board of directors and authorised for issue on 28 March 2024 and are signed on its behalf by:
Michael Lowndes
Director
Company Registration No. 14243728
Exchequer Contracts Ltd
Notes to the financial statements
For the period ended 31 December 2023
10
1
Accounting policies
Company information
Exchequer Contracts Ltd is a private company limited by shares incorporated in England and Wales. The registered office is 1st Floor, The Exchange, 1 St John Street, Chester, CH1 1DA.
1.1
Reporting period
The financial statements represent the period from incorporation on 19 July 2022 to 31 December 2023.
1.2
Accounting convention
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006 as applicable to companies subject to the small companies regime. The disclosure requirements of section 1A of FRS 102 have been applied other than where additional disclosure is required to show a true and fair view.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
1.3
Going concern
The directors clearly acknowledge the FTT findings in June 2022 and the subsequent appeal of the UTT in January 2024. Directors have carefully considered their next steps to mitigate the costs to ESL. We are confident that ESL will have sufficient resources to continue to trade as a going concern and support ECL for a period of not less than 12 months from the date of signing, this is supported by financial forecasts and cash flow.true
1.4
Turnover
Turnover is recognised at the fair value of the consideration received or receivable for services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
When cash inflows are deferred and represent a financing arrangement, the fair value of the consideration is the present value of the future receipts. The difference between the fair value of the consideration and the nominal amount received is recognised as interest income.
Revenue from contracts for the provision of professional services is recognised by reference to the stage of completion when the stage of completion, costs incurred and costs to complete can be estimated reliably. The stage of completion is calculated by comparing costs incurred, mainly in relation to contractual hourly staff rates and materials, as a proportion of total costs. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that it is probable will be recovered.
1.5
Cash and cash equivalents
Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.
Exchequer Contracts Ltd
Notes to the financial statements (continued)
For the period ended 31 December 2023
1
Accounting policies (continued)
11
1.6
Financial instruments
The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the company's statement of financial position when the company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets
Basic financial assets, which include debtors, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Classification of financial liabilities
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
1.7
Equity instruments
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
Exchequer Contracts Ltd
Notes to the financial statements (continued)
For the period ended 31 December 2023
1
Accounting policies (continued)
12
1.8
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Where items recognised in other comprehensive income or equity are chargeable to or deductible for tax purposes, the resulting current or deferred tax expense or income is presented in the same component of comprehensive income or equity as the transaction or other event that resulted in the tax expense or income. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
1.9
Employee benefits
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
2
Critical accounting judgements and key sources of estimation uncertainty
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
Management have concluded there are no significant accounting judgements, estimates or assumptions to note.
Exchequer Contracts Ltd
Notes to the financial statements (continued)
For the period ended 31 December 2023
13
3
Employees
The average monthly number of persons (including directors) employed by the company during the period was:
2023
Number
Total
4
Debtors
2023
Amounts falling due within one year:
£
Trade debtors
9,331
5
Creditors: amounts falling due within one year
2023
£
Amounts owed to group undertakings
9,999
Taxation and social security
7,874
Other creditors
12,330
30,203
Included within creditors is £9,900 due to other related parties.
6
Parent company
The company's immediate, and ultimate, parent company is Exchequer Solutions Limited. Its registered office address is 1st Floor the Exchange, No 1 St John Street, Chester, CHA 1DA.
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