Very simple tax & book keeping guide?

GoToGal

Help!

In the last tax year, I was both employed and self-employed as an I.T contractor. Having survived my first year, I'd like to understand tax and keeping books a lot better than I do at the moment rather than rely only on my accountant.

Any recommendations for software or books that will guide me step by step?

Thanks

xylophone

Have you looked at http://www.taxcafe.co.uk/keepingitsimple.html

Radsteral

lophole , i ll take your word for it... just bought one ''treating'myself for christmas

sick of feeling like stupid and submiting/signing to whatever accountant asks

GoToGal

Thanks for the recommendation, I've taken a couple of books out of the library for now. Any more I should consider?

jimmo

Lots of information available from the government. This might be a good starting point.
http://www.hmrc.gov.uk/record-keeping/index.htm
I had a quick look at a couple of the links given and see that the Business Link website also allows you to download Excel spreadsheets which could be good.
I don’t know what books you have borrowed from your library but traditional bookkeeping, also known as Double Entry Bookkeeping, is pretty time consuming stuff and, in my experience, is rarely, if ever, used in the small and medium enterprise (SME) field (HMRC’s definition of SME is businesses with an annual turnover of less than £30 million).
However, when I was a trainee Tax Inspector my first week of training was spent at a training centre followed by a further 12 weeks spending 1 full day a week at the training centre, half of my time in the office on the other 4 days each week and a minimum of 10 hours homework.
That was really just an insight into bookkeeping but my employers clearly considered it was time and money well spent. I too think it was time and money well spent in my case and the knowledge I gained was absolutely invaluable in my day to day work after I had become an Inspector of Taxes.
What about you?
You have to earn yourself a living. Do you really have the spare time to seriously study bookkeeping?
Certainly in my days at HMRC business accounts that were prepared from anything other than a full set of Double Entry books were known as “Incomplete Records”.
In many ways “Incomplete Records” implies that something is wrong with the business records but the practicality is that everyone produces “Incomplete Records”.
Speaking as a taxman, I would guess that your tax affairs as an IT contractor are pretty straightforward in bookkeeping terms but there could be complications regarding (employment) status and, dare I say it, IR35.
Please, don’t get carried away with bookkeeping. Just keep honest business records of what income you receive and what you spend in running your business.
Just as an example, there are quite a number of threads on this forum about use of part of the home as an office. The real question is to what extent the house is used for business purposes. No amount of bookkeeping will alter the amount you are entitled to claim.

chrismac1

I largely agree with the last comment. Both people who've posted into this thread imply that their accountants are putting things in front of them to sign that they do not understand. Surely it is his or her job to explain them in sufficiently plain language that they do understand them? This is something I am personally prepared to take a lot of time over, especially in the first year of having a new client or, for example, when a sole trader client forms a limited company and hence gets a more complex final product.

Personally I would not sign something I did not understand. And I'd ask specific questions on each aspect I did not understand. If the replies were either full of jargon or given in a condescending manner along the lines of "don't bother me with questions about your accounts" I would get another accountant. It's your name on the accounts, your name at Companies house and HMRC, not your accountant's.

chrismac1

A specific example. As a contractor the value of sales in your books equals the value of work done, this may not be the same as work invoiced. In fact it normally won't be. Let's say you have one project which permits you to invoice £10k up front and this happens just before year-end. This will not go to sales but to "Deferred Income" in the balance sheet which means you pay £2k less corporation tax. More commonly, by year-end you might have done £10k of work which the client has signed off but you invoice this just after year-end. This £10k gets added to your sales and an asset called "Accrued Income" suddenly appears on your balance sheet. Your corporation tax bill is £2k higher as a result.

I always draw attention to these sorts of entries in clients' accounts. For one thing, it's possible I may have misunderstood the way the contracts are operating and being invoiced, the numbers I've put in the draft accounts might be wrong! Only by discussing them with each client and reaching a common understanding of what the sales line should be - which is after all the single most important number in any set of accounts - can you submit them with a happy heart. I document the details arising from these discussions, so that later questions from HMRC or funding providers can be quickly answered rather than saying "Now how did we arrive at that number?"