I dont think it is worth spending the money on an accountant orginally. Use an accountant at a later date to ensure that as your business grows more complex the financial structures of the business are well managed. To do simple accounts I wouldn't pay for an accountant but then again I wouldn't risk it yourself either. There is a lot at stake if your get things wrong so I would make use of an easy to use cost effective software package. Make sure you look for a package that meets the needs of your business though as there are plenty around - check out compare software for business.co.uk its a good comparison site for small businesses looking for business software.
Some of my best tax refunds for clients, especially sole traders, have come from the start up period. Fine, I can't disagree that the accounts themselves can be simple in the first couple of years, but what about the tax side of things. OK, I hear you say "I've made little or no profit so the tax return shows no, or little, tax payable" - but that's completely missing the point of what tax refunds may have been available. Very few people know all the permutations for loss reliefs, fewer still realise there are different rules for loss reliefs between income tax, NIC and tax credits. Even fewer still know there are tax planning opportunities for chosing the "right" year end in the first trading period - no, not the simple one of chosing April 30 to defer some tax long term, but how about shortening the first period below a year so that losses get allocated into different tax years to maximise tax refund.
One spectacular case was a lady who had just taken early retirement from a well paid job (higher rate tax), and started her own consultancy - she'd done her own first year accounts and drafted her own tax return showing no tax due, and I'd agreed to look over it all for her for a nominal fee, as she wanted peace of mind. I looked at it, and yes, it was all technically correct. I met with her and told her and she was pleased that she'd managed to do it herself. Then I dropped the bombshell that although it was right, if she'd done things differently, she could have a tax repayment of a couple of thousand more. The thing was that the first few months showed big losses where she was setting up (last six months of tax year), and lots of capital expenditure, then the remainder of the year (first six months of next tax year) showed decent profits - netting out to a modest profit for the first 12 months which she'd assumed to be the first accounting period. I showed her that if she prepared accounts for a shorter first period, they'd show a big loss, which could be offset against her 40% taxable earnings in earlier tax year, rather than against PA and BR profits in second tax year. Result was one happy client who then decided to pay for the accounts/returns to be re-done for that first year and has remained a happy client ever since.
OK, I now this thread is about limited companies, but my point is relevant. How many firms start up as limiteds? Of those, how many would have been better off setting out as sole traders, to get better tax relief on initial losses (potentially at 40% with immediate refund) rather than eventually at 20% in years to come? For a business starting up relatively slowly, that may make losses in the first few months, it makes sense to delay incorporation and start as a sole trader/partnership and then convert to limited further down the line when profits warrant it (unless of course there are compelling reasons for limited from day one!).
Far too many people just don't realise the power of even the simplest of tax planning. Threads like these just concentrate on the mechanics/technicalities of the book-keeping and accounts preparation. Of course, the average Joe Public can do their own books and accounts and can follow the HMRC guidance notes to complete the tax return, but what about the tax planning side of things? Accountants spend years learning their trade and know what "tricks" to look for in even the simplest business to maximise tax refunds and delay future tax liabilities.
Even book-keeping isn't that simple - yes, as mentioned above, accounts packages can do a decent set of accounts, but they don't do it themselves - you need a human to input the right data in the right place - most packages just give the ability to enter "journals" to do this, but don't actually tell you what to do, when to do it, or how to do it. If you don't know how to prepare accounts properly, you just end up with a record of receipts and payments - that's not adequate for tax returns, you have to deal with depreciation, capital allowances, prepayments, accruals, debtors, creditors, amortisation, stocks, etc.
So, yes, back to the original question, yes, of course, Joe Public can do his own. He'll have to do plenty of research on company law and tax law to do it, he'll have to understand accounting standards - OK there are pro-formas to help. But even if he achieves all that, he still won't know whether he's optimised his tax position. He may be happy with a tax bill of £1,000, but would he still be happy if he was told it could have been a refund of £2,000 instead if he'd used a decent accountant?
