FINANCIAL SUPPORT SYSTEMS LTD

1. Risk Rating: MEDIUM

The company is currently solvent with a positive balance sheet and strong cash at bank, but the scale of contraction and the substantial fall in reserves over the past three reported periods warrant caution. Liquidity is adequate today, but the trend is adverse and future solvency depends on stabilising operations.

2. Key Concerns

2.1 Rapid balance sheet contraction and reserve depletion

Between 2022 and the latest period, the company’s financial profile has compressed sharply:

• Total assets: from £14.8m (2022) to £2.0m (2025)
• Shareholders’ funds: from £7.9m (2022) to £453,871 (2025)
• Retained reserves fell by £2.37m during the 15-month period ended 31 August 2025

The latest accounts do not include a profit and loss account, so it is not possible to determine from the filed information whether the reserve decline reflects trading losses, dividend distributions, or a combination of both. Either way, the erosion in the capital base is significant.

2.2 Large tax and social security creditor relative to equity and cash

Creditors due within one year include:

• Taxation and social security: £992,623
• Total current liabilities: £1,582,909

That tax liability is more than twice the company’s total shareholders’ funds and represents around 63% of all reported liabilities. While this could reflect normal tax accruals, the size relative to the current equity base justifies direct verification of payment status and terms with HMRC.

2.3 Heavy reliance on related-party arrangements

The company has material balances with entities under common control:

• Owed £470,351 to related companies, repayable on demand
• Due from related companies: £220,120
• Recharges incurred from a related company: £2,648,306 in the latest period

The ultimate controlling party is Capstech Ltd, which owns more than 75% of the company. These intercompany positions create dependency and reduce transparency around the group’s financial position and cash-flow support.

3. Positive Indicators

3.1 Solvent balance sheet

The company has positive net assets of £453,871 and positive net current assets of £439,133. There are no reported long-term borrowings on the latest balance sheet.

3.2 Strong cash position

Cash at bank increased to £1,516,134, up from £346,429 in the prior year. Cash alone covers approximately 96% of current liabilities, and total current assets cover current liabilities about 1.3 times.

3.3 Good filing compliance

The company is Active at Companies House with no overdue accounts or confirmation statement. The latest accounts were filed under the small companies exemption, and no formal insolvency proceedings are indicated on the available record.

4. Due Diligence Notes

The following should be investigated further before any investment or credit decision:

1. Profitability and cash-flow visibility
   Obtain full management accounts, the profit and loss account for the 15-month period, and forward cash-flow forecasts. The absence of the P&L in the filed accounts limits any assessment of current trading performance.

2. HMRC position
   Request an aged breakdown of the £992,623 tax and social security creditor, including VAT, PAYE, and corporation tax. Confirm whether any time-to-pay arrangement exists and whether HMRC has any preferential claims.

3. Related-party and group support
   Review the terms and purpose of related-party loans and recharges, the financial standing of Capstech Ltd, and whether any formal group support or guarantee arrangements exist. The disclosed PSC shareholdings also appear overlapping and should be clarified.

4. Operational capacity and restructuring
   The average monthly headcount fell from 123 to 42, and amounts recoverable on contracts fell from £1.95m to £41,895. Clarify whether this reflects sale/transfer of IVA case books, outsourcing, or a reduction in underlying business volumes. Assess redundancy and restructuring liabilities not fully reflected on the balance sheet.

5. Regulatory position
   The website describes the company as a provider of IVA services. Confirm the company holds all necessary FCA permissions or is otherwise properly authorised for regulated debt services, and review any regulatory or complaints history.

6. Going concern
   The filed accounts do not appear to include a detailed going-concern note. Obtain a formal going-concern