Case study: South Lodge Limited

South Lodge is an exclusive 5-star hotel and spa based in Horsham, Sussex. Part of Exclusive Collection’s family owned, independent collection of country house properties, South Lodge is situated in a scenic environment in West Sussex, where its luxurious Victorian country house sits amongst 93 acres of beautiful countryside and gardens in an elevated position with unobstructed views overlooking the South Downs.

The client’s sustainable growth plans include the construction of lakeside eco-lodge accommodation and further developing their vineyard. Once the vineyard at South Lodge is fully established, it is estimated to produce over 30,000 bottles of wine.

These projects will enhance the guest experience at South Lodge, while the eco-project will help develop and deliver on their sustainability focus for their industry, local community, and South Lodge’s guests.

The client had approached us due to our existing relationship with the Exclusive Hotel Group. South Lodge’s objectives were clear from the outset – they required an integrated approach for not only their audit and tax needs but for all services requested, including capital allowance reviews and other corporation tax services. Corporation tax formed a significant part of the assignment for South Lodge to ensure tax matters were handled efficiently with a focus on maximising relief, proactively spotting any tax issues and reducing liabilities.

Capital allowance claims: The client was undertaking a large-scale project to underpin their commitment to sustainability and future commercial performance. The costs involved and tax allowances surrounding them were complex in nature. So, a detailed understanding of the project and review of the costs would be necessary to ensure that capital allowances could be maximised.Without this review, the long-term cost of the project would significantly increase.

Corporation tax: Menzies provided full taxation services and with this came the advice on quarterly payments, taking into account the capital allowances which was beneficial during the large project in terms of cash flows

Corporate interest restrictions: As a result of interest rates reaching modern highs over the last two years, the client was at risk of seeing a significant tax disallowance on interest charges, which was flagged by the tax team and options have been explored relating to this.

Collaboration between internal teams: Having come to Menzies from a top 6 firm, the communication with Menzies has been substantially improved with a good audit planning timetable. With this collaboration, all deadlines have been met with regards to the timetable. This is something we regularly encounter when taking on clients from larger firms, especially involving complex assignments that involve multiple departments. This collaboration has resulted in efficient planning for the projects of South Lodge’s vineyard and eco-lodge project.

Recognising the client’s need for a more unified approach to their services, Menzies adopted a strategic plan rooted in our Brighter Thinking methodology. This approach involved proactive communication, collaboration across departments, and delivering tailored advice that met the unique demands of the client’s business and their future growth plans.

1. Identifying key issues and creating a clear roadmap: Menzies began by compiling a comprehensive breakdown of the client’s existing challenges. This included a detailed analysis of the issues the client had experienced, compliance gaps, and any areas where the client could benefit from greater financial oversight.
2. On-site visits: We conducted regular on-site visits to better understand the client’s operations, including current and future projects, and allow us to gain deeper insights into their working processes. During these visits, we focused on reviewing their processes in real-time, which was instrumental in identifying and assessing their expenditures.
3. Clear lines of communication: Understanding that communication and a joined-up approach was important for the client. Menzies ensured there would be regular and transparent interactions between our audit, tax, and accounts teams, and with the client.
4. Technical guidance on sustainability project: Given the unique aspect of the client’s vineyard and eco-lodge project, Menzies provided specialised guidance on the technical accounting treatment of biological assets. This advice was crucial for ensuring that the client’s financial statements accurately reflected the value and costs associated with the project.
5. Tax planning and proactive advice: The Menzies team requested forecast results for FY24 and FY25 in advance and used this, along with our understanding of the ongoing projects, to ascertain an estimated tax liability position across the group. We helped the client obtain a substantial refund from HMRC while the major capital project was ongoing to ease cash flow at a critical time rather than waiting until after the year end to obtain these refunds.

We also alerted the client to their corporate interest restriction obligations, which the client had previously been unaware of. Carrying out capital allowances claims in real time not only helped the client to maximise tax relief but has also helped with their cash tax planning to ensure timely and reliable tax estimates could be made both for the current and future periods.

• We developed a clear roadmap that outlined the steps required to address each issue, communicated this to the client, and set out clear expectations of the project and the timelines involved.
• Our holistic approach allowed us to address issues collaboratively, minimising the risk of missing deadlines, miscommunication in terms of project requirements, and importantly, reducing the risk of a breakdown in relationship between client and our firm.
• We performed a detailed review of capital spend and allowances receivable and ensured that all capital allowance claims were filed accurately and in a timely manner, allowing the client to maximise tax relief on eligible capital investment.
• We ensured that all capital allowance claims were prepared on a real time basis, allowing the client to maximise tax relief and assist with their cash tax forecasting.
• We worked with the client to forecast taxable profits and bring forward tax refunds, to minimise the external finance required to complete the sustainability project.
• Menzies team’s collaboration across departments and forecasting meant that we were able to advise the client on when they would next expect corporation tax to become payable, which has given the client the understanding they need to make strategic decisions with confidence.

Our work with South Lodge highlights the value of a tailored, collaborative approach to addressing complex business challenges. By combining our expertise in audit, accounts, corporate tax, and capital allowances, we were able to deliver an integrated solution that not only resolved the client’s past challenges but also set the foundations for their sustainable growth.

Through proactive communication and on-site visits, strategic insight into their current and future projects, and diligent tax planning and compliance work, we enabled South Lodge to optimise their tax reliefs and ensure seamless financial operations for the ongoing success and growth of their business. By addressing the client’s unique challenges and ensuring seamless collaboration across departments, we were in a position to add real value in the client’s mission to build a sustainable hotel.