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    • sneekymum
    • By sneekymum 22nd Jul 05, 11:17 AM
    • 4,642 Posts
    • 3,861 Thanks
    sneekymum
    • #2
    • 22nd Jul 05, 11:17 AM
    • #2
    • 22nd Jul 05, 11:17 AM
    No you don't need an accountant.

    Have a look at the tax return.

    Try filling it in in pencil. I'd recommend going through the form first - refer to the notes only as needed (to avoid overload). You have ten years of proper examples of how to do this - and how to write up you end of year accounts also.

    Try dedicating a whole morning to getting the hang of it. When it starts to take up more time than it would cost in earnings to get your accountant to do it, then its time to give up. But you won't know till you try.

    You can always ask questions here.
    still raining
    • WHA
    • By WHA 22nd Jul 05, 11:38 AM
    • 1,343 Posts
    • 1,028 Thanks
    WHA
    • #3
    • 22nd Jul 05, 11:38 AM
    • #3
    • 22nd Jul 05, 11:38 AM
    It depends how complete and accurate your book-keeping is and whether you actually understand the principles of accounts preparation. If you look at the "profit and loss account" prepared by your accountant and havn't a clue what it all means, then you shouldn'e try to do it yourself. However, if you can understand it, where the figures come from and what year end adjustments are needed (accruals, prepayments, debtors, credtitors and depreciation), then you should be able to manage fine. Of course, your underlying accounting books and records must be complete, accurate and properly balanced or you wouldn't have anything to start from.
  • Lawbag
    • #4
    • 22nd Jul 05, 12:02 PM
    • #4
    • 22nd Jul 05, 12:02 PM
    500 - money for old rope.

    considering your earnings, this is way over the top, and to be fair your accountant could find a cheaper method to do your accounts. But then its not in his financial interest to do so.
    "See you on the Other Side"
  • brantwood150
    • #5
    • 22nd Jul 05, 2:38 PM
    • #5
    • 22nd Jul 05, 2:38 PM
    500 - money for old rope.

    considering your earnings, this is way over the top, and to be fair your accountant could find a cheaper method to do your accounts. But then its not in his financial interest to do so.
    by Lawbag
    Do you say that from personal experience?

    I've got to say that I don't think that 500 is particularly expensive for preparing accounts, preparing tax computations, completing and submitting a SA tax return, and dealing with the NIC liabilities. If the fee includes dealing with enquiries then I think you're getting even better value.

    I don't know how well your accounting records are kept (so no disrespect intended) but when I was a trainee and dealt with small businesses the quality of record keeping generally fell into the "bag full of invoices and bank statements" category.

    The time taken to prepare accounts from this kind of "record keeping" (or even from rudimentary accounting records when they were kept) was huge. The size of income from the business does not necessarily have a direct relationship with the amount of work involved and hence the fee.

    I still prepare self-employed accounts, and deal with the SA tax work for members of my family and it takes forever to do. I don't even get paid for it, but if I did, 500 each seems like a reasonable fee.

    If you understand accounting principles and the vagaries of the personal tax system, then prepare your own by all means. If you don't then consider the 500 as an insurance policy - if he cocks it up, you have someone to sue. If you !!!! it up yourself, you don't.

    It is often a knee-jerk reaction to say that accountants charge too much without the accusers knowing what actually goes into the process.

    I'm sure that I could have a go at fixing my boiler or putting in a new radiator if I wanted to but I prefer to pay what is often a lot of money to a plumber instead. Plumbers have abilities that I don't and charge me for the privilege accordingly. Accountants do the same.

    [/me steps off soap box]
    Everyone loves Magical Trevor.
    'Cause the tricks that he does are ever so clever.
  • Richie(UK)
    • #6
    • 22nd Jul 05, 3:49 PM
    • #6
    • 22nd Jul 05, 3:49 PM
    Hi,

    Like brantwood, I don't think that a fee of 500 is particularly large. It all depends on the amount of work involved and the level of experience of the people undertaking the work (the better they are, the more they cost). The price is only too high if it is something that you can, and are willing to, do yourself. Otherwise it is money well spent, IMHO.

    If you feel that you are capable of undertaking the work yourself, and that you won't unduly worry about it, then by all means do so (there is no legal requirement for you to make use of an accountant).

    One piece of advice - many tax professionals (and nearly all MPs!) struggle to do the manual tax calculation in a tax return. Give serious thought to submitting the return before 30 September so that the Revenue will calculate the tax for you. (Of course, you won't have an accountant to tell you whether the calculated figure is correct )
    • sneekymum
    • By sneekymum 22nd Jul 05, 4:05 PM
    • 4,642 Posts
    • 3,861 Thanks
    sneekymum
    • #7
    • 22nd Jul 05, 4:05 PM
    • #7
    • 22nd Jul 05, 4:05 PM
    Yes - that's a good one - let the IR do the sums....and then check to see if you agree. It also stops you from putting the whole thing off until you're close to penalty time.

    I can see how the OP would balk at 500 when on an income of 15-20K. I got a quote a couple of years ago and it was 225. I felt that I'd have to have it all tidy to present to him though -.... like cleaning your house before the cleaner arrives....

    My technique is to keep records that could be transferred directly into the boxes on the tax return - though I update these cumulatively every month (on the 5th). It then takes about ten minutes to do the return itself.
    still raining
  • Richie(UK)
    • #8
    • 22nd Jul 05, 4:51 PM
    • #8
    • 22nd Jul 05, 4:51 PM
    ... I can see how the OP would balk at 500 when on an income of 15-20K. I got a quote a couple of years ago and it was 225. I felt that I'd have to have it all tidy to present to him though -.... like cleaning your house before the cleaner arrives....
    by sneekymum
    The thing is sneekymum, it isn't the OP's level of income that determines the amount charged (unless you can find an accountant that offers some form of means-tested fees) - its a combination of the amount of work involved and the cost of the people doing the work.

    If somebody has a salary of 1M and their return consists solely of a P60 entry and a couple of P11D entries then it isn't going to cost much. On the other hand, if somebody with income of 10k presents you with the classic 'bag job' (a scruffy carrier bag packed full of unsorted, crumpled and torn, coffee-stained, cigarette-smelling invoices) and expects you to prepare a set of accounts and a tax return then its going to cost a lot more.

    By all means shop-around for a cheaper quote - but keep in mind that, as with many things, cheaper isn't always better. Don't expect Rolls Royce service when you pay Kia prices.
    • Poppy9
    • By Poppy9 22nd Jul 05, 5:24 PM
    • 17,986 Posts
    • 22,277 Thanks
    Poppy9
    • #9
    • 22nd Jul 05, 5:24 PM
    • #9
    • 22nd Jul 05, 5:24 PM
    This has been discussed before. Have a look at these threads to see if they help you.

    SA & Accountants

    Part time working & Self Employed

    Book Keepers



    A previous poster mentioned accruals, prepayments, debtors, credtitors and depreciation. Don't let these words scare you (as they did my OH)

    Accruals are entries for invoices/goods that you haven't yet paid by the end of your trading year but have received. These are called CREDITORS. DEBTORS are invoices which you have not yet issued for work completed by the end of your tradiing year.

    PREPAYMENTS & RECEIPTS IN ADVANCE are exactly what they say they are - paying in advance for something that you will receive in your new trading year i.e. paying insurance up front for 12 months. Receipts in advance are the receiving of money for which you have provided no goods or services yet i.e. in your case maybe deposits for work.

    You have to be disciplined in doing your accounts because the last thing you want is an end of year panic. If not yourself perhaps your OH will do them for you (for a small fee of course).

    As you will see above I included a thread on employing a book keeper. Cheaper than an accountant and you may then be able to tackle your Self Assessment form yourself. Basically you pay your money and take your choice. Could you earn more in the hours it will take you to prepare your accounts?

    Good luck.
    ~Laugh and the world laughs with you, weep and you weep alone.~
  • brantwood150
    A previous poster mentioned accruals, prepayments, debtors, credtitors and depreciation. Don't let these words scare you (as they did my OH)

    Accruals are entries for invoices/goods that you haven't yet paid by the end of your trading year but have received. These are called CREDITORS.
    by Poppy9
    That isn't entirely correct. Accruals are not the same as creditors. What you have described above is a creditor. As you set out above, creditors are simply payments due to people that have invoiced you but that you have not paid at the period end.

    Accruals are generally adjustments to include some, or part of invoices issued after your period end for services etc that are delivered for a period that occurs before your period end.

    e.g. you order parts for a job which you complete before period end, but you don't get invoiced until after the period end. Therefore you need to make an accrual for the costs shown on the invoice.

    Alternatively, you may receive an invoice after period end which relates to services covering a period which spans your period end, e.g. your utility costs. You need to apportion these so that you include the element of the service that has been consumed during the accounting period. This is normally done by splitting the cost on a time basis.

    That is an accrual

    DEBTORS are invoices which you have not yet issued for work completed by the end of your tradiing year.
    by Poppy9
    Again, not right. Debtors are people that you have invoiced but not been paid for yet. What you are talking about is accrued income.

    Maybe you should let the words scare you
    Everyone loves Magical Trevor.
    'Cause the tricks that he does are ever so clever.
    • Poppy9
    • By Poppy9 22nd Jul 05, 11:28 PM
    • 17,986 Posts
    • 22,277 Thanks
    Poppy9
    That isn't entirely correct. Accruals are not the same as creditors. What you have described above is a creditor. As you set out above, creditors are simply payments due to people that have invoiced you but that you have not paid at the period end.

    Accruals are generally adjustments to include some, or part of invoices issued after your period end for services etc that are delivered for a period that occurs before your period end.

    e.g. you order parts for a job which you complete before period end, but you don't get invoiced until after the period end. Therefore you need to make an accrual for the costs shown on the invoice.

    Alternatively, you may receive an invoice after period end which relates to services covering a period which spans your period end, e.g. your utility costs. You need to apportion these so that you include the element of the service that has been consumed during the accounting period. This is normally done by splitting the cost on a time basis.

    That is an accrual



    Again, not right. Debtors are people that you have invoiced but not been paid for yet. What you are talking about is accrued income.

    Maybe you should let the words scare you
    by brantwood150
    And you wonder why people don't like accountants

    I tried to put into plain English the end of year procedure in a form a lay person will understand. You are just nit picking . For a lay person its easier for them to understand that Accruals are accounting for payments/income from a future trading year in the accounting trading period which has just ended. They are familiar with the term Creditors/Debtors there is no need to confuse them. A small business book keeper just needs to keep to basics and not get too technical.

    As an accountant with over 20 years experience I know that some people suffer number blindness and panic and others can grasp the concept if you keep it simple. Completing a Self Assessment form is not rocket science but it terrifies some people and they will never understand the concept. IMO the OP has been given some sound advice. None of us know his level of competence in book keeping/accounting. My brother is a bag keeper who likes to deal in cash, my sister an excellent book keeper via bank transactions etc . My bro is happy to pay the accountant whatever he wants for sorting out his smelly, grubby bag (as I'm not touching it )

    The OP has to make the decision which is best for him.
    ~Laugh and the world laughs with you, weep and you weep alone.~
  • brantwood150
    And you wonder why people don't like accountants

    I tried to put into plain English the end of year procedure in a form a lay person will understand. You are just nit picking . For a lay person its easier for them to understand that Accruals are accounting for payments/income from a future trading year in the accounting trading period which has just ended. They are familiar with the term Creditors/Debtors there is no need to confuse them. A small business book keeper just needs to keep to basics and not get too technical.

    As an accountant with over 20 years experience I know that some people suffer number blindness and panic and others can grasp the concept if you keep it simple. Completing a Self Assessment form is not rocket science but it terrifies some people and they will never understand the concept. IMO the OP has been given some sound advice. None of us know his level of competence in book keeping/accounting. My brother is a bag keeper who likes to deal in cash, my sister an excellent book keeper via bank transactions etc . My bro is happy to pay the accountant whatever he wants for sorting out his smelly, grubby bag (as I'm not touching it )

    The OP has to make the decision which is best for him.
    by Poppy9
    Sorry if that seemed like a bit of a rant but I get fed up of the "bar-room" accountants who seem to think that accountancy is money for old rope. I've had conversations with people who claim that they know it all and that could do the job and then go on to show how they actually don't know what they are talking about.

    Anyway, back to the point in hand. I agree with what you say in the main and, for most people, completing a SA tax return shouldn't be complicated. The difficulties come with the stuff that goes behind the self employment section. I've heard all sorts of rubbish about what people think they can claim deductions for.

    With regard to the bookkeeping and accounts preparation side of things, I think that if more people were given a little more knowledge about some of these terms then they would be better placed to understand whether they need an accountant or not.

    However, I just don't think that confusing them with the wrong terminology will help. We don't teach kids in school about WWII when we mean the Vietnam war just because they will understand the words "WWII" better. They are different things.

    If someone knows what their accountant is talking about when he/she mentions accruals/prepayments and tries to blind them with science (=baffle them with bullsh** in some cases) then they can probably make a better decision about whether they need an accountant or not. Alternatively, they could help to bring the fees down if they understand more about what the accountant has to do and can do some of that work before handing their stuff over to him/her.

    Educate people but do it properly. Dumb it down (not said in a condescending way) but use the right words.

    For the record, I've been doing this for over 20 years as well and I have always done my best to educate clients to help themselves as far as possible (using the right terms of course .
    Everyone loves Magical Trevor.
    'Cause the tricks that he does are ever so clever.
  • ninky
    financial responsibility
    i've heard that if you have an accountant and they make a mistake, you are still financially responsible for the mistake. you can sue them for negligence but this won't necessarily help - especially if they go bust or disappear. does anyone know if this correct?

    also, if you do your own tax, it makes you take more responsiblity for your finances. most people can learn to do most things. that's not to discredit accountants. but as they say - self-assessment doesn't have to be taxing
  • brantwood150
    i've heard that if you have an accountant and they make a mistake, you are still financially responsible for the mistake. you can sue them for negligence but this won't necessarily help - especially if they go bust or disappear. does anyone know if this correct?
    by ninky
    Unfortunately, correct. The tax is your personal liability and you sign off the tax return to say that it is correct. If you have appointed someone to advise you about what to put in the return, and they advise you incorrectly, than you have still submitted an incorrect return and the liability for any tax and/or penalties is primarily yours.

    If your advisor has been negligent in advising you then you can sue them for any loss arising from their negligence. However, proving negligence is notoriously difficult to do. (Generally, cases of professional negligence rarely end up in the courts - their insurance companies nearly always settle out of court)

    also, if you do your own tax, it makes you take more responsiblity for your finances. most people can learn to do most things. that's not to discredit accountants. but as they say - self-assessment doesn't have to be taxing
    by ninky
    I'm all for people taking more responsibility for understanding their own affairs. Whenever I've been to see solicitors or financial advisors and they advise me on a course of action, I am always a pain in the @ss and want to understand the reasoning behind them coming to that advice. I think it's important to take a level of ownership instead of devolving everything to someone who may, or may not, be giving good advice.
    Everyone loves Magical Trevor.
    'Cause the tricks that he does are ever so clever.
    • Debt_Free_Chick
    • By Debt_Free_Chick 26th Jul 05, 9:09 PM
    • 13,149 Posts
    • 9,492 Thanks
    Debt_Free_Chick
    But there is no requirement for the self-employed to account on an accruals basis, is there? I thought accounts could simply be drawn up on a receipts & payments basis i.e. you include in your accounts what you've actually received (fees for services) and what you've actually paid out (expenses incurred).

    You still depreciate, but there is no requirement to accrue for work done, but not invoiced; invoices issued, but not paid; and expenses incurred, but not settled. You just need to remember to add back the depreciation to calculate taxable profit and claim capital allowances instead.

    With a bit of research, it can be done IMHO. The most crucial thing is to the books as you go along i.e. every week (or day, preferably!). Do a bank reconciliation monthly, when you get the statement and the year-end takes no time at all.
    Last edited by Debt_Free_Chick; 26-07-2005 at 9:12 PM.
    • Cook_County
    • By Cook_County 26th Jul 05, 10:13 PM
    • 2,977 Posts
    • 2,093 Thanks
    Cook_County
    are you a barrister?
    Barristers are permitted to use a cash basis for the first 7 years of their business. There is a current debate about whether or not professionals (such as accountants) need to accrue for work in progress (related to accounting principles).

    Those on income of less than 15,000 by concession can use the cash basis.

    Everyone else? Hands up!! Accruals is mandatory...

    Professionals with qualifications have to hold mandatory indemnity insurance (and it sure is expensive!). If you choose a qualified person they are paying for you to be covered.
    • Debt_Free_Chick
    • By Debt_Free_Chick 26th Jul 05, 10:33 PM
    • 13,149 Posts
    • 9,492 Thanks
    Debt_Free_Chick
    But there is no requirement for the self employed to prepare accounts at all - except in certain professions. A plumber is not required to prepare accounts, although there may well be reasons why it might be a good idea to do so e.g. to raise finance.

    All a plumber needs to do is to declare the right numbers to complete the self assessment tax form. And that is just profit, derived from income to the business (fees for work done) less those expenses allowed as a deduction for income tax. A simple statement of income & expenditure is all that's required.
    • WHA
    • By WHA 27th Jul 05, 10:10 AM
    • 1,343 Posts
    • 1,028 Thanks
    WHA
    But there is no requirement for the self-employed to account on an accruals basis, is there? I thought accounts could simply be drawn up on a receipts & payments basis i.e. you include in your accounts what you've actually received (fees for services) and what you've actually paid out (expenses incurred).
    by Debt_Free_Chick
    I'm afraid that is not correct - Extract from Inland Revenue Help Sheet IR222 - http://www.hmrc.gov.uk/helpsheets/ir222.pdf Perhaps you are getting confused with the "cash basis" for VAT which does allow VAT returns to be completed based on actual income and expenses.

    "HOW BUSINESS PROFITS ARE TAXED
    Profits which arise from carrying on trades, professions and
    vocations cannot usually be worked out by simply adding together
    the cash receipts of the business and deducting expenses paid out.
    This would show the business's cash flow, but it would not
    normally be a proper measure of its profits. To arrive at the profits
    it is necessary to draw up accounts using the methods which
    accountants have developed for dealing with income which has
    been earned but not received, expenses which have been incurred
    but not paid or paid but not fully used, and so on. And the profits
    arrived at using these methods - the commercial profits - have to
    be adjusted for tax purposes. This is because in arriving at the
    commercial profits some items of income or expense may be
    recognised as not taxable, or tax deductible, and other special
    allowances may reduce the amount of profits which are taxable."
    Last edited by WHA; 27-07-2005 at 10:14 AM.
    • Cook_County
    • By Cook_County 27th Jul 05, 10:14 AM
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    Cook_County
    I am sorry that I cannot agree
    Martin's Board is excellent and should not spur on controversy. However even your friendly local plumber must draw up accounts to complete his or her tax return using accounting principles. HMRC do a good job of explaining this on Help Sheet IR222 (http://www.hmrc.gov.uk/helpsheets/ir222.pdf)
    • Debt_Free_Chick
    • By Debt_Free_Chick 27th Jul 05, 10:38 AM
    • 13,149 Posts
    • 9,492 Thanks
    Debt_Free_Chick
    Nnnoooooo! IR222 tells you how to calculate your taxable profits - it's making the point that (if you have accounts) any profit shown in your accounts is NOT the figure to use when you complete your tax return. Read this bit again.

    "And the profits arrived at using these methods - the commercial profits - have to be adjusted for tax purposes. This is because in arriving at the commercial profits some items of income or expense may be recognised as not taxable, or tax deductible, and other special allowances may reduce the amount of profits which are taxable."

    The self-employment pages on the self assessment form actually have a section headed "If you do not have accounts".

    You do not need to have accounts if you are a sole trader - but if you do, you must NOT use the profit shown on those accounts. As an example, you must add back the depreciation on any fixed assets and claim capital allowances instead.

    Business Link

    "If you are a sole trader or partner, you can choose not to prepare formal accounts, but you still need to keep records of income and expenditure over a set accounting period".

    With respect, you seem to be looking for stuff that you think confirms that sole traders must complete accounts?
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