self employed accounts

loobs40

I became self employed as an IT Contractor 6 months ago. Previous to that I had a Ltd Company and company accounts were produced by my accountant.

I am a little confused when looking at the info about self certification mortgages. It often says that lenders will need to see your accounts. I don't intend to produce any accounts in my self employed status. My income is very straightforward, and I have practically no expenses in relation to that.

Have I got the wrong end of the stick here ?

Debt_Free_Chick

You're right, there is no requirement to produce accounts, unlike a limited company. However, you might want to produce accounts for a number reasons - even if your accounts are very simple.

Your accounts show you how the business is doing.
Your accounts show lenders how the business is doing.
You'll need the profit from the business to complete your self-assessment tax return.

They're straightforward to do. And, as you say, for a self-cert mortgage you'll need to show accounts.

You say you have few expenses .... are you sure you're claiming all you are entitled to as tax-deductible expenses? No point in letting the taxman have any more than he's entitled to

loobs40

I suppose it depends on the definition of accounts. I keep my own records, so I know exactly how much income I am getting and I have the info in a spreadsheet.

I want to avoid using an accountant. Can I produce accounts without an accountant ?

Re expenses, I have practically none and any expenses I have, the tax saving would be minimal . My tax return for various reasons I won't go into here, will be done by another party, although up till now I have always done my own online.

dunstonh

You cannot produce your own accounts if you are going to use them as proof. You could put anything down.

Why do you want to avoid using an accountant? If you have made it easy for the accountant, as it sounds you have, then it shouldnt cost much. The cost may well be covered in allowances that the accountant knows about but you dont. e.g. what depreciation on assets have you included, what percentage of motor expenses have you included (including depreciation on car). The accountants cost is tax deductable as well.

I have basic accountancy qualifications and yet I still use an accountant to prepare my accounts (I have to as its an FSA requirement). I usually do my own so i can prepare for my tax bill but the real accountant always comes in with a lower tax bill than I prepare and always by more than the amount of his bill. So i am in net gain.

Then you have proper certified accounts which a lender would have no problem with.

Debt_Free_Chick

You can produce your own accounts and simply get an accountant to certify them.

The cost may well be covered in allowances that the accountant knows about but you dont. e.g. what depreciation on assets have you included, what percentage of motor expenses have you included (including depreciation on car). The accountants cost is tax deductable as well.

DD, you must know that what you put in your accounts is not necessarily the same as what you claim as tax-deductible. In my accounts, depreciation on assets follows the usual accounting conventions - in my case, straight line depreciation over the expected life of the asset (only computers & furniture). However, for tax I have use Capital Allowances.

I'm not an accountant, have no accounting qualifications and don't use an accountant (other than to certify my accounts). I do use Sage Instant Accounts, though, for the bookeeping & preparation of accounts (P&L and Balance Sheet). For the tax deductible stuff, I might have considered a tax specialist, but to be honest, it's all on the HMRC site and your local tax office will help with any queries.

I prefer to use my money to get advice on stuff I can't find out for myself .... each to his own though But I wouldn't automatically suggest that anyone self employed should use an accountant. In some cases it really isn't necessary if you're prepared to do the research and put the time/effort in.

Regards

loobs40

I have an accountant currently and he has never saved me a jot in tax. However I pay him well over £1000 per year. I consider that a lot of money for not a lot

My accounts will be extremely simple. I can't emphasize that enough!!! It will be basically income in and nothing else. My tax affairs are dealt with by another professional party

I like the sound of getting an accountant to certify them, if thats what it takes. What sort of price are we talking about here Debtfreechick ?

Conrad

Debt_Free_Chick wrote:

I prefer to use my money to get advice on stuff I can't find out for myself .... each to his own though But I wouldn't automatically suggest that anyone self employed should use an accountant. In some cases it really isn't necessary if you're prepared to do the research and put the time/effort in.

Regards

I find my Accountants fees are vastly less than the Tax saving I make. For example; he recently suggested I become LTD. As a result he set up a notional sale of my partership to my ltd company for £100000. This notional £100k has now been fully offsett against Tax.

I also like to do things myself, but recognise it is often better to use experts as they posses knowledge and experience that no text book or Govt web - site will.

telly-addict

loobs40 wrote:

I have an accountant currently and he has never saved me a jot in tax. However I pay him well over £1000 per year. I consider that a lot of money for not a lot

My accounts will be extremely simple. I can't emphasize that enough!!! It will be basically income in and nothing else. My tax affairs are dealt with by another professional party

I like the sound of getting an accountant to certify them, if thats what it takes. What sort of price are we talking about here Debtfreechick ?

Any 'certification' is unlikely. Auditors of limited companies only provide an opinion as to whether the accounts are 'true and fair' rather than a certified 'right or wrong'.

Quite often what you will get is that the accountant will confirm that he has verified the figures presented by tracing them back to the supporting documentation.

When I was working in practice with a Big 4 firm of chartered accountants we often needed to assist solicitors in partnership with their mortgage applications and we wouldn't complete the forms sent out by the mortgage companies that wanted the accounts certified.

If your accountant will 'certify' your accounts, as simple as they may be, no doubt they will include a suitable caveat that they have only been reviewing the figures presented by you. The cost will depend, as usual, on how much work is involved i.e. length of time x hourly rate.

loobs40

telly-addict, are you saying that getting my self employed (not ltd company) accounts certified would probably not be accepted by a mortgage company?

telly-addict

loobs40 wrote:

telly-addict, are you saying that getting my self employed (not ltd company) accounts certified would probably not be accepted by a mortgage company?

What I am really saying is that any certification that is given, isn't really worth very much as the accountant will caveat exactly what they are saying. It may well be sufficient for the mortgage company, they all differ in what they accept. Best to ask the mortgage company first what 'proof' they want.

Any accountant worth his or her salt is going to cover their !!!!!! so that if you don't pay the mortgage it won't be because of what they said! They are highly unlikely to give an opinion as to whether you will be able to make the payments.

Conrad

loobs40 wrote:

I became self employed as an IT Contractor 6 months ago. Previous to that I had a Ltd Company and company accounts were produced by my accountant.

I am a little confused when looking at the info about self certification mortgages. It often says that lenders will need to see your accounts. I don't intend to produce any accounts in my self employed status. My income is very straightforward, and I have practically no expenses in relation to that.

Have I got the wrong end of the stick here ?

Most Self - Cert schemes will certainly not require accounts. Many lenders however may wish to make 'reasonability checks'. As such they may want an independant Accountant to verify you are self employed and the length of time trading. Some lenders will not require any confirmation at all as long as everything seems reasonable (eg - if you say your on £120000 pa they might want to investigate the case further given the high figures involved).

The crucial factor will be the size of your deposit. A minimum of 10% will be required. Yours is a typical self - cert scenario so I wouldnt worry un - duly.