Mar 13, 2019
Something that often catches out small businessmen is their accounting.
For example, there are two company annual returns to Companies House and one to HMRC.
These can be quite daunting for someone not familiar with accounting.
Technical terms are used, login access has to be obtained and some new businessmen are so naive they think they can set up a company and just leave it. That is not so.
Changing circumstances always require additional work and advice from your accountant. The client goes over the VAT threshold and the accounts become more complicated. The accountant makes more money, but, he earns it.
Accountancy is boring and complicated to the small-businessman and that’s why accountants get paid to do it.
Being tax efficient is a great way to ‘earn’ money by not giving it to the taxman.
Even if clients don’t earn much they want to save tax. Some businessmen are quite canny and make their accountant work for his daily bread.
A good accountant is responsive to your queries, files on time and saves you tax money.
For this kind of support, you can’t use a cheap accountant; they have to work for their bread and they have studied hard, for years, to know what they know.
You want someone you can trust to do your accounts; someone who is a member of a professional body and who doesn’t make mistakes you have to correct him about.
A good accountant can talk to a client on his level, explain to him what is needed to maintain his records properly and to remain within the bounds of the law of the land. Bookkeepers can handle simple procedures but when you have a complicated crisis you need a professional to help you.
It is possible to outsource accounting to, say, India, but such persons will not have the day-to-day knowledge of current affairs in the UK and HMRC’s latest accounting requirements.
Typical Accounting Tasks
– Companies House accounts;
– Companies House Confirmation Statement;
– HMRC: Tax return for Corporation Tax.
These returns require:
– Companies house authentication code;
– UTR number for corporation tax return to HMRC.
– Payroll (PAYE) – optional, but usually necessary.
If you earn a reasonable amount, or you don’t have another job, then basic tax planning would be for you to have a payroll.
– Register for PAYE;
– Collate staff information;
– Monthly submissions and payslips sent;
– Annual P60 emailed.
– Changes to pay or rate;
– Changes in staff, which requires …
… new staff details to be collated and issuing a P45 for the outgoing staff member!
– Changes in staff tax code annually and possibly during the year;
– Sick leave, maternity, annual leave;
– CIS: Construction Industry Scheme, in the building trade;
— Verification of staff for the scheme.
And then the UK sales tax:
VAT – mandatory and voluntary
There’s an £85k turnover threshold, if your business reaches it, which leads to:
– The VAT Registration process;
– Quarterly returns (quarterly accounts with deadline 1 month and 7 days);
– Choice of schemes.
Important: Self-assessment tax returns for Directors is legally required even if they do not take any benefit from the company.
And then there’s the information required to complete the Self Assessment tax return. The accountant will need records of all personal income:
– P60 from employers;
– Records of any taxable benefits such maternity allowance;
– Rental income accounts if you rent a house;
– If married, a marriage allowance adjustment (only applicable if applied for and main earner is not a higher rate tax payer);
– CGT calculations if you sold a second home/rental property and more.
For anything beyond filling in P60 figures the additional work would normally be an extra charge.
The 64-8 Client Authorisation Form
This gives authorisation to the accountant to communicate with HMRC on behalf of clients. It must have codes for each type of tax and must have an original signature; scans are not acceptable.
The above are the sort of tricky things you pay your accountant to deal with so you don’t have to. Accountancy for anything other than a one-man-band with simple income and expenditure accounts requires someone with a professional qualification.
Preparing and submitting accounts is complicated and stressful and interferes with the normal running of business if the small businessman is trying to do it himself.