I’m worried my accountant is overcharging and deliberately over complicating my sole trader account.

Avasmokey

I’m new to this forum, hopefully this is the right forum for this type of post. I was made redundant in January. Started my own business in February.

It's a very simple business and I am set up as a sole trader.

As it was my first year I decided to use a local accountant. I had to buy a van and had various start up costs and it all felt a bit complicated so I thought it was worth getting some help.

They said the cost of doing my accounts and tax return would be a maximum of £300- this would be if I just gave them a disorganised pile of information.

I gave them very organised info, in a spreadsheet, all income and expenses listed with receipts and invoices cross referenced etc.. I only had 2 months of trading info as there were only 2 months of the trading year to go.

They also had to incorporate details of my previous income from my previous job as part of the tax return.

They have billed me £420 (£350 plus VAT). I'm confused and horrified.

I also don't understand the work they have done. They have prepared a set of accounts, P&L and balance sheet- I don't think this is necessary for a sole trader?

I don't understand how they have apportioned costs, calculated various things etc... It all looks so so complicated and makes me feel I couldn't possibly do it myself next year- but I run a tiny simple business!

Looking at the tax return it looks like maybe they have completed stuff that isn't necessary for my small business.

I think I'm going to email them, ask if they can explain the work done, and the calculations and also query the bill.

I just can't justify this huge cost going foreword. I accept I may have to pay this time, but not next year- although I'm not sure I could manage to complete the forms myself!

Can anyone advise me on any of this please?

Dazed_and_confused

What did the contract you signed say about fees?

Don’t forget it’s possible your accountant may have saved you more tax than their fee is. Or not.

Though it’s unlikely you can establish that from an Internet forum.

pramsay13

Tax doesn't have to be taxing.

It does sound as if they are maybe giving you the same treatment they would give any business including much more complicated ones.

Feel free to ask them what they have done and why until you are happy with the bill and then if you choose to go it alone next year there are plenty of websites and tutorials to help.

I do my own accounts and have done every year except one when I got an accountant. I got a vehicle that year and some equipment so thought I could do with a bit of help.

The accountant charged me £150 (maybe around 5 years ago) and saved me around £200 in tax that I wouldn't have included due to not fully understanding the rules.

I just let him know I would be doing it myself for the following year.

Avasmokey

Thanks so much for your replies.

I don’t think they have saved me anything in tax. I had only traded for one month, and so made a loss ......

I can’t understand how they have dealt with my van purchase, and a few other things also. I would really like to understand so that if I’m
Brave enough to do it myself next year I can be consistent..... Do you think they should be able to explain how and why they have done these things?

00ec25

Avasmokey wrote: »

Thanks so much for your replies.

I don’t think they have saved me anything in tax. I had only traded for one month, and so made a loss ......

I can’t understand how they have dealt with my van purchase, and a few other things also. I would really like to understand so that if I’m
Brave enough to do it myself next year I can be consistent..... Do you think they should be able to explain how and why they have done these things?

sorry but you have said it yourself: "I don't understand"
- you can google the tax treatment of a van purchase for self employed if you want to teach yourself as there are specific rules for a van
- what you cannot easily google, as it takes a lot of reading, is the tax treatment of losses. That you ask them to explain to you, and you must know what they did for next year if you have any hope at all of DIYing next time because that treatment will form the basis of your next tax return.

I agree a balance sheet is not needed, but if they are using software that automatically generates one anyway, so be it.

Avasmokey

I have tried to use google to help me understand what to do about my van purchase- but there’s so much info that it’s hard to find the correct stuff and I’m still none the wiser.

What do you mean when you say they need to explain how they have treated my loss in terms of tax?

Pennywise

If you "made a loss", it's likely that they've opted not to use "simplified cash basis" so that loss relief can be claimed against your other income (i.e. prior employment), hence that means more complicated accounts on the "accruals" basis.

Under the simplified cash basis, losses can only be carried forward against future profits of the same trade.

Re the balance sheet, most accounts production software works on the double entry basis, so a "balance sheet" is a by product that takes little or no time to produce, often it's automatically transferred into the tax return software without any "human" interaction. Our software certainly does that, so highly unlikely that any significant time has been spent preparing the balance sheet unnecessarily.

Re fees, it's a business to business transaction, so it's usually for VAT to be added on top of the quote. So even if they'd stuck to their £300 "quote" it would have been £360 with the VAT added.

Pennywise

Avasmokey wrote: »

I just can't justify this huge cost going foreword. I accept I may have to pay this time, but not next year- although I'm not sure I could manage to complete the forms myself!

Avasmokey wrote: »

I have tried to use google to help me understand what to do about my van purchase- but there’s so much info that it’s hard to find the correct stuff and I’m still none the wiser.

I think both quotes answer your question really. If you can't understand how capital allowances work then you're not going to be able to complete the tax return yourself. It's not just the year of purchase, there may be residual capital allowance claims in future years and at some stage you'll sell it and maybe buy another, so you'll almost certainly have to deal with capital allowances in future years.