Help regarding accountancy fees

Ariel1982

Good evening all

I'm looking at taking the huge step of going from a sole trader to a LTD company, and registering for VAT.

I've been given a list of required services and prices from my current accountant, and I'd appreciate if you could look this over for me. The fees seem on the steep side, although I'm assured that doing this will save me money.

Here's what I have - it's long, I'm sorry:

I’ve now had chance to pull together a plan, and calculate the fees, for helping to transfer your sole trader business to a company. Here’s what I’ve got in mind:

· The new company is incorporated ASAP (I have checked and the name is available at the moment)

· The transfer will take place on (this gives us plenty of time)

· We will register you for VAT from the first day, and also help you apply to join the Flat Rate Scheme

· My colleague will help you to set up your accounting system on Xero (the cloud based software that we discussed) and will train you how to use this – please note there is a monthly license fee for the software of between £12 and £19

· We will help you set up a company bank account, advise your customers of the change, and also your suppliers


Following the incorporation process:

1. We will prepare your quarterly VAT returns for you using Xero and we will submit these on your behalf to HMRC

2. We will set up a PAYE scheme from 6 April 2014, to provide you with tax efficient remuneration

3. We will help you decide on a suitable dividend policy to give you the money you need tax efficiently, and we will prepare all documentation to support the dividends

4. We’ll deal with all statutory returns to Companies House

5. We will prepare the company’s accounts and corporation tax returns

6. We will prepare your personal self assessment tax return

7. We’ll provide you with unlimited meetings and telephone calls throughout the year for free


What you should save:

· Based on you making profits of £40k on a turnover of £60k you will save around £2,000 in corporation tax – potentially more

· Utilising the Flat Rate Scheme for VAT you will be approximately £3k better off each year, more in year 1


Our fees:

· Helping you with the incorporation, setting up Xero, dealing with VAT registration and all other matters required to get you up and running - £500 plus VAT

· Preparing the quarterly VAT returns, dealing with all company secretarial matters, preparing the annual accounts and corporation tax returns for the company - £1,500 plus VAT

· Operating a PAYE scheme for you from 6 April 2014 - £150 plus VAT per tax year

· Preparing your personal tax return when you become a director - £70 plus VAT per year

· Preparing your final sole trader accounts to 31 October 2013 - £350 plus VAT


So, the additional fees each year for operating as a company are £1,650, but you save £5,000 or more – a net benefit of £3,350. You will also benefit from enhanced credibility (Limited Companies tend to attract a bit more authority), and importantly you will have limited liability which means your home and personal assets aren’t at risk if something really bad happens.

I know that this is a lot to take in, so if you’d like to meet for a coffee to go through it, or talk through this on the phone, please let me know.



I'm wondering if all of these services are necessary, or are things that I can do myself relatively straightforwardly, for less.

Advice and feedback really appreciated

Thanks
Ariel

longforgotten

I thinks its a big hike from £420 including vat for a sole trader set of accounts to £1800 including vat for Ltd company accounts & extras. Or is it that your last set of accounts for being a sole trader is less than a year and therefor less work time to prepare......

Whether sole trader or Ltd once registered for vat you cannot claim the vat back on your accountancy fees when using the flat rate scheme, so quoting excluding vat is I feel is a bit misleading.

Presumably you already have a book-keeping system for your sole trader accounts. Can you not continue to use the same system and do the vat return yourself. After all the flat rate scheme is for ease of use, eg if your sales are £10000 and the flat rate scheme says the vat to show on the return is 8% then its an easy calculation. E-filing is also quite straight forward and if you are happy using a computer there is nothing to be afraid of.

I do however like the unlimited meetings and phone calls for free! You could take them up on there offer for the first year , and in that year get that much info out of them in meetings/phone calls that you can be able to do most of it yourself in the second year

Xero... don't know that much about it but do you really want them to have that much control over your business ?

paddyrg

Seen better, seen worse. Depends how much you want to do yourself, really. Unlimited advice is nice, and I can totally see why doing your annual returns for the limited company is a little dearer than as a sole trader. You can get cheaper, but £1k+ is typical for year end and seeing as they do your vat and companies house returns as well it's not outrageous.

Xero - sounds expensive for basic accounts package. Setting as you're being charged for setup as well, how about asking if you can be set up on something like gnucash (free) as an option?

BTW you can by all means haggle.

Ariel1982

Thanks for the replies. It's all so overwhelming. Considering that I work from home, with very few expenses, and currently deal with my 'bookkeeping' through a simple spreadsheet it just all seems like a huge leap (and maybe unnecessary?). I don't really understand what unlimited advice I would need if I'm paying someone to do my accounting?
It seems to me like the savings I would make on tax are being swallowed up in fees. And I am in two minds about registering for VAT as it will make me less competitive and I won't be able to charge it to all of my clients. It seems like a whole lot of hassle for the benefit. Plus, I'm in my third yr of trading - Profits have doubled each year - but what if next year isn't as good? Then I'm stuck paying these high fees and may end up worse off?
Thanks for the advice so far

notanewuser

Our ltd company turnover is a minimum if £100k per annum. We're on the flat rate vat scheme and I do the vat returns. Accounts are done on a standard excel spreadsheet that I put together. Accountant charges £1k plus vat per annum to do:

Companies house returns
Payroll, P11ds, tax returns x2, P60s, monthly report to HMRC
Annual end of year accounts, corporation tax calculations.

That £1200 per year saves us at least £10k per year.

Savvy_Sue

One big question is have you been happy with their services up to now? Do you get answers you can understand, when you need them? If yes, then it could be worth paying out a bit more for their services.

BTW, you wonder what advice you might need if they're preparing end of year things for you. What you have to remember is that you're the one signing to say these things are accurate (certainly for your personal tax return), so it may take a few calls before you understand and are happy with what you're signing.

Pennywise

Being a limited company does require better book-keeping. For example, to know how much you can pay in dividends during the year, you need some robust management accounts, and a simple spreadsheet doesn't really cut it in most cases. Also, with VAT registration, again, a simple spreadsheet is a risk because spreadsheets are always going to be more prone to errors. The year end accounts do indeed take longer to prepare as they're more comprehensive and detailed. Payroll does take time.

None of those charges appear excessive. Yes, you can get it all done cheaper, but likewise, many firms will charge a lot more. Our firm would probably charge around £1200 per year for all that for a simple business for example.

From what you say, it sounds like your business is growing rapidly, which will probably push you into higher tax rates and may also push you over the VAT threshold anyway. Even if you stayed as a sole trader, the accountancy fees will be more once higher rate tax is involved and again when VAT registration is necessary/beneficial. So comparing what you pay for a sole trader today against the future ltd co isn't really the whole story - your sole trader accounts may, eg, cost £500 next year (hr tax) and maybe £1000 the year after if you VAT register and want the accountant to do your VAT returns!

As savvy has said, are you happy with your accountant? Do they answer your queries when you ask? Have they given you grounds for complaint or worry about their services/fees in the past? You don't appear to trust them on this, so is that because you've had problems in the past? If they've been fine with you historically, then it may well be worth paying a little bit more than you'd pay for a cheaper accountant to keep the same level of trust and service quality that you've had so far.

They're offering to talk you through it, so take them up on the offer and discuss your reservations. Why not ask about doing the VAT returns yourself - it's not particularly complicated and a system like Xevo will give you the figures to submit. Same with payroll, you can prepare and submit yourself either by the free HMRC website or by buying a simple software package like Moneysoft (around £60).

Savvy_Sue

Pennywise wrote: »

Same with payroll, you can prepare and submit yourself either by the free HMRC website or by buying a simple software package like Moneysoft (around £60).

The only thing I'd say about doing your own payroll, is that it's one of those things you just HAVE to do, regardless of your personal situation at the time, and even more so with RTI in place - when I was running a small weekly payroll a few years ago I could at least do the sums, write the cheques and worry about the HMRC side of things on a monthly / 3 monthly basis.

Dog just died and you're in bits? Still got to do the payroll. Much loved relative just died and you've got to go to a funeral the other end of the country? Still got to do the payroll. Fancy a holiday at short notice? Still got to do the payroll.

Now, I know that running your own business there may be a lot of things you just HAVE to do, regardless of what else is going on in your life, but if you have people working for you, then not paying them is just about the worst thing you can ever do to them.

Plus, although the basics are very simple, a professional payroll service should also be able to guide you through the complexities of SSP, SMP, SPP, student loans, and stop you doing anything completely stupid. Just as an example, we had a situation where our payroll asked "do you have a clause in your statement of terms and conditions which allows you to reclaim money for leave taken but not accrued?" Yes we did, but it's good to know they're looking out for things like that.

Ariel1982

Thank you.

I am happy with the service although they've only done one year returns as I did self !!! first year.

Profits first yr were 10k
2nd 20k
3rd - estimate around 50k for this tax year.

My turnover is likely to be nudging the VAT threshhold for this year if all goes well.

It has grown so rapidly that I'm not prepared. I don't even have a business bank account. I work from home. I'm working so hard on the actual work that I have hardly any time to tend to the 'business' side of it.

Re payroll - I dont have any employees. Or do you mean to pay myself??

I would be happy to pay around £1k per year for the service, but with VAT this will be pushing 2k I think - which will nearly wipe out my tax savings, and the VAT is a bit of a tricky issue as I may have to absorb some of the costs so not to damage my competitive rates to companies that aren't VAT registered.

Thank you so much for the replies - it's all helpful

Prothet_of_Doom

How many invoices and sales do you make in a month ?

I typically only have 4 or 5 invoices a month for sales, and almost all my expenditure goes through my business account, so it's not massive ammounts of information.

I set up my own ltd company £35 (2 hours of effort)
Applied for Flat Rate Vat (about 4 hours of researching HMRC website)
Registered as an employee (about 2 hours)
Set up a bank account (4 hours of working out which was best, plus a couple going into branch)
Set up my own accounts system on excel. It's fairly simple as I explained.

On going:

I do my VAT return (an hour every 3 months plus a yearly submission an hour)
I do my own PAYE submission for me and employees (Using HMRC simple software - 35 mins per month, plus P35 submission that takles about an hour once a year)

I Work out what salary and what dividend to pay myself for best outcome (an excel spreadsheet, took about an hour to input all the figures and I played around for a couple of days - an hour in total)
Self assessment ? Did that last night, took an hour.
So that leaves what I pay an accountants staff to do.
I give him a years worth of paperwork and an excel file with a number of tabs, and my estimate of profit, and CT estimate, and he passes it to a bloke in the back office who turns that into abreviated accounts for companies house, and submits that and then submits it to the HMRC. He checks all my figures and payments to HMRC, and then I get charged £450 plus VAT

Savvy_Sue

Ariel1982 wrote: »

Re payroll - I dont have any employees. Or do you mean to pay myself??

Wasn't clear from their quote whether you were taking on staff. I don't know how it works when paying yourself from a ltd co.

If you've very busy growing the core business, then to me it makes sense to pay someone else to do the non-core things which nevertheless need to be done, leaving you free to do the core things.

I'd meet up with them, as suggested, and haggle.