New Ltd company - do I HAVE to use an accountant?

[simonukbf38468]

I’ve been operating as a sole trader for the last two years and all is well but I definitely see the advantage of being a limited company.

But I’ve run a limited company before and ended up paying £150 a month to an accountant to do my end of year accounts.

Is there really no way to just get my accounting software to produce whatever companies house etc need each year without paying accountancy fees?

(V small business - turnover under £20k - understand the value of accountants but seems a waste on such a small business)

 

[Adam93]

Do you need an accountant.… no. Filing accounts will still cost you though in time and in money (software costs). It’s like most things, you can service your own car, you can carry out your own property renovations etc etc, but people often don’t due to lack of skills and/or time.

If your turnover is £20k and the services you require would be annual statutory accounts and payroll for one director and maybe your personal tax return, £150 per month seems on the high end. If you shop around you could probably get the same service for half that.

 

[UK Contractor Accountant]

but I definitely see the advantage of being a limited company.

What advantages would those be for sub £20K business?

 

[SEODEV#338055]

What advantages would those be for sub £20K business?

Being a limited company at < 20k is more about opening doors and prestige

Far less hassle to stay sole trader

Also keep your books in order, do an online book keeping course or through your local college, university, business innovation centre or library, there are plenty of available options

1. https://www.gov.uk/guidance/help-and-support-if-youre-self-employed
2. https://www.gov.uk/expenses-if-youre-self-employed/training-courses
3. https://www.open.edu/openlearn/mone...-bookkeeping-and-accounting/content-section-0

Don't pay silly monthly fees to an accountant

Waste of money

One end of year fee is quite adequate for your < 20k business

HMRC isn't coming after you at that level

Of course I'm not a tax expert and I'm sure other members will pick this apart

Just like I clip my toenails

 

[simonukbf38468]

Yep it’s about protection for me in case anything we’re to go wrong but also Ipswich Tours Ltd does look better than Dave Smith t/a Ipswich Tours. Plus we can’t get verified on FB etc as a sole trader

My accounts are bang up to date and all done online so in my opinion it really should be easy to take that data and turn it in to something companies house would be happy with!

 

[simonukbf38468]

Do you need an accountant.… no. Filing accounts will still cost you though in time and in money (software costs). It’s like most things, you can service your own car, you can carry out your own property renovations etc etc, but people often don’t due to lack of skills and/or time.

If your turnover is £20k and the services you require would be annual statutory accounts and payroll for one director and maybe your personal tax return, £150 per month seems on the high end. If you shop around you could probably get the same service for half that.

Thanks Adam. Already paying for the software and if it only takes a few hours then that’s fine with me! I already do my own self assessment each year and that takes me about 30 minutes. Will definitely look into annual statutory accounts.

 

[Spur Support Services]

If you are looking to move to a limited company then does that mean you are looking to grow?

If you are looking for an accountant, then ensure that you are looking for the right sort of accountant, who has the training, qualifications and experience to give you the services you need.

For example, it sounds as if you are confident with completing your bookkeeping, but it may well be that you need help when considering tax strategy, VAT, Payroll etc.

Can you do it alone? - Yes
Should you get an accountant - Yes, as long as it is the right sort of accountant

NB, don't forget to buy a second software subscription for the limited company as it is a separate legal entity.

 

[fisicx]

I keep track of everything using the free software my bank provides.

At the end of the year my accountant sorts everything out along with my tax claims and allowances. Saves me a lot more than the one-off payment I make. Worth paying the money just to not have to deal with everything. He sends me details of my corporation tax, I logon to HMRC and make the payment. Job done.

 

[MyAccountantOnline]

I’ve been operating as a sole trader for the last two years and all is well but I definitely see the advantage of being a limited company.

But I’ve run a limited company before and ended up paying £150 a month to an accountant to do my end of year accounts.

Is there really no way to just get my accounting software to produce whatever companies house etc need each year without paying accountancy fees?

(V small business - turnover under £20k - understand the value of accountants but seems a waste on such a small business)

do I HAVE to use an accountant?​

No

But can you deal with all that's required and ensure you pay no more in tax than is legally necessary?

I've been an accountant for a long time and have seen so many people pay totally avoidable penalties and tax where they've tried to save money on accountants fees.

You will find very good accountants who will charge you less than £150 per month.

 

[Lisa Thomas]

You don't have to use an accountant but it can get very expensive if you make a mistake.

 

[The Byre]

I look upon our accountants as a source of revenue. They have certainly saved us more than they cost over the past 20+ years and they made us aware of direct grants available during the lockdown that we otherwise would not have received. As these were considerable, just that last grant pretty much paid their costs for several years!

Add to that, because they are a highly respected partnership with nearly 100 partners, we have been able to tap into their know-how on a variety of issues dealing with all kinds of complications.

Also, we know that HMRC is unlikely to target us for inspection with such a partnership filing our returns. An experienced accountant will look at the returns and think 'Hmm, that doesn't look quite right to me!' and flag up a query with our bookkeeper (we have just such an issue going on right now).

A DIY approach to returns fills an inspector's heart with joy - along the lines of "Well that looks a bit odd and I haven't had much to amuse me all week, so let's have some fun with this one!"

As a rule, investigations into careless tax returns go back six years and investigations into innocent errors go back up to four years. BUT if they suspect deliberate tax evasion, they can investigate as far back as twenty years. And if you have not kept all your receipts, etc. for the past twenty years, they can make assumptions - ones that you would not like them to make!

A long time ago, I had a neighbour who was such an inspector and he specialised in cases of serious criminal evasion. In such cases, things can get out of hand and several times a month, he had to have an armed police escort!

 

[simonukbf38468]

Thanks all - really useful advice.

I definitely get that having an accountant do the EOY stuff is best but I'm reluctant to pay out for that if it's something I can do myself ... which I think I can.

I've 20+ yrs of experience of running my own Ltd Co and doing its bookkeeping and have worked with a couple of different accountants.

The turnover of this business is so low that I don't anticipate paying any tax so that shouldn't be an issue.

If all I have to do is take some figures from my reconciled software and put them into a pre-formatted document and upload that to Companies House then it's worth a go.

 

[MyAccountantOnline]

Thanks all - really useful advice.

I definitely get that having an accountant do the EOY stuff is best but I'm reluctant to pay out for that if it's something I can do myself ... which I think I can.

I've 20+ yrs of experience of running my own Ltd Co and doing its bookkeeping and have worked with a couple of different accountants.

The turnover of this business is so low that I don't anticipate paying any tax so that shouldn't be an issue.

If all I have to do is take some figures from my reconciled software and put them into a pre-formatted document and upload that to Companies House then it's worth a go.

Dealing with bookkeeping and looking after company accounts and tax really are very different things.

I'd certainly suggest you get some decent accounting software and ensure the company accounting records are accurate and complete. That actually saves a lot of time for an accountant and should reduce the fees you pay.

If dealing with company accounts properly was as simple as taking figures from 'reconciled software' and uploading them to Companies House I'd be a VERY rich accountant.

 

[DWS]

The turnover of this business is so low that I don't anticipate paying any tax so that shouldn't be an issue.

So your Company will be making a loss?

 

[The Byre]

Dealing with bookkeeping and looking after company accounts and tax really are very different things.

Funny you should mention that - the wife and I had a long discussion yesterday about the difference between books, P&L and tax returns - three different things. (And three things I do not deal with! I just look at them, read them and sign them off.)

If dealing with company accounts properly was as simple as taking figures from 'reconciled software' and uploading them to Companies House I'd be a VERY rich accountant.

I doubt it as all kinds of silly people would be having a go at DIY accountancy! You would be poorer - but the inspectors at HMRC would have waaay more fun!

As things stand, the UK has the most complex tax laws on Planet Earth, I believe we are up to about 25,000 pages of legislation, rules and guidelines by now - and growing! That means that there are just too many "Ah yes, but . . ." things that even our esteemed bookkeeper does not know. Too many gotchas and "Why didn't you just do this?" to consider.

Just the lockdown grants alone - yes, the automatic ones could be DIY'ed, but then it makes the world of a difference if the application for the discretionary grants comes from an accountant who specialises in grants and similar nonsense.

 

[STDFR33]

Funny you should mention that - the wife and I had a long discussion yesterday about the difference between books, P&L and tax returns - three different things. (And three things I do not deal with! I just look at them, read them and sign them off.)


I doubt it as all kinds of silly people would be having a go at DIY accountancy! You would be poorer - but the inspectors at HMRC would have waaay more fun!

As things stand, the UK has the most complex tax laws on Planet Earth, I believe we are up to about 25,000 pages of legislation, rules and guidelines by now - and growing! That means that there are just too many "Ah yes, but . . ." things that even our esteemed bookkeeper does not know. Too many gotchas and "Why didn't you just do this?" to consider.

Just the lockdown grants alone - yes, the automatic ones could be DIY'ed, but then it makes the world of a difference if the application for the discretionary grants comes from an accountant who specialises in grants and similar nonsense.

6102 pages of direct and indirect tax legislation.

 

[paulears]

Well, I'm a sole trader and today signed of my accounts when the accountant sent them over ready to submit. I don't mind admitting that I have no idea where some of the details in the various boxes comes from or what it is, and it's relevance in the reduction in tax due. Making tax digital costs me £18 a month, using Freeagent which handles my VAT for MTD. My accountants invoice was just over £800. I'm very happy with this because that's £300 less than it was when I didn't use Freeagent. I don't have the background or knowledge to understand how the level of stock I have or the asset value works or is even calculated - I know my stock costs and levels, but he has managed to pull out the goods purchased and created them as assets that are being written off - I know how much I paid for things but what he then does with it, and what it's implications are in the accounts - I really don't know. Covid clearly made a big difference to my finances - far more an impact than I thought, and my tax liability has gone right down.

Do you know how to do company accounts?

 

[The Byre]

Making tax digital costs me £18 a month, using Freeagent which handles my VAT for MTD.

That's expensive!

£20 a year is all you should be paying. Go to 123-sheets. https://123sheets.com/ Other services are similarly priced and are available.

 

[paulears]

Yes - if it was only for the filing, but for me the reconciling, invoicing, receipt handling, bill management, and bank account manipulating is worth it. The accountant's reduced price is because he can do work on my modest accounts whenever they are slack, and not in the end of year panic - so it works really well. For those who want to just file - it's fine, but with income tax shifting to MTD too, I think it good value and some people get it free via their bank.

 

[Lisa Thomas]

Well, I'm a sole trader and today signed of my accounts when the accountant sent them over ready to submit. I don't mind admitting that I have no idea where some of the details in the various boxes comes from or what it is, and it's relevance in the reduction in tax due. Making tax digital costs me £18 a month, using Freeagent which handles my VAT for MTD. My accountants invoice was just over £800. I'm very happy with this because that's £300 less than it was when I didn't use Freeagent. I don't have the background or knowledge to understand how the level of stock I have or the asset value works or is even calculated - I know my stock costs and levels, but he has managed to pull out the goods purchased and created them as assets that are being written off - I know how much I paid for things but what he then does with it, and what it's implications are in the accounts - I really don't know. Covid clearly made a big difference to my finances - far more an impact than I thought, and my tax liability has gone right down.

Do you know how to do company accounts?

This is risky, because if your signing of the accounts is your acceptance and approval of them. This means you wouldn't be able to argue against that at a later date. If you don't understand what you are signing you should ask the accountants to explain it. I've often had cases where Directors subsequently try to dispute accounts but don't have a leg to stand on because they were signed off and filed.

 

[Perbinder]

I run a limited company and for my end of year accounts for a 50k turnover I get quotes ranging from 300 upto well over 1k. I am still unsure what you get for the extra money! I would love to know.

i do my own VAT returns using the £5per month software with lloyds bank and use a free online system for payroll.

if you have an hmrc investigation will the accountant defend you or hide behind the “unaudited accounts”?

So far no accountant has ever saved me extra money in my corporate accounuts

For self-assessment i had an accountant who’s fees seemed to magically increase each time I have a refund. I now use the cheapest around on the net.

 

[paulears]

Is an accountant not a bit like a doctor? I used to know my doctor - but I've never seen one in three years, and while I've been in hospital three times, I've not seen my doctor. If I ask him for tramadol, via the online request system, they turn up at the pharmacy. The pharmacist checks every time that I know what they are, and the important stuff. I was sent to my doctors immediately by my chiro when she spotted a change in my back pain. The receptionist would not pass the message I'd been given to any doctor, offered me an appointment with the nurse next day. I went to A&E and they saw me immediately, did some tests and a scan and told me that it was OK, but a good job I'd come in and to come back if another symptom appeared straight away - day or night. Next day my doctor phoned me up because it said on the A+E discharge form that I'd been to the doctors and been turned away.

I think accountants are the same. Your distant on-line accountant simply does the figures for you and presses a few buttons. No knowledge of what you do, so no advice based on anything other than your submission. If you got selected for inspection - what use would he be? Does he know enough about your business to spot when you get things wrong? Mine does. He emails or phones and says did you know you have spent far more money than you earned? Where is the funding coming from. I explain and he makes sure that it works in the most tax efficient way. He spots errors in the VAT, though I submit these myself - he notices things, when he's very busy I get emails from his daughter as it's a family business. She found a mistake in the spreadsheet I use to record sales, purchases and stock - which made my stock appear higher than it was. This goes on the self-assessment and would have been wrong.

My accountant knows considerably more than me. I have known him for years and I trust him. He's never let me down. My previous firm were like yours - I was a minnow in their collection of shark firms. They didn't have a clue what I did and didn't want to know. They were also useless in the inspection. The HMRC inspector asked about my car. I looked confused - I don't have a car, just a transit van. She looked at the accountant who said sheepishly, I thought you had a car. The figures I showed the inspector said VAN fuel, VAN servicing etc etc and he'd just got it wrong. That was what I had to repay - everything I had done was dead accurate - but that was the time to move, which I did.

 

[Perbinder]

And you used the NHS for free which accountants are not. I wonder if you would have done the same with private practice or insurance was affected.

I still don’t see the benefit so far. how much do you pay for this service and how much do you actually save?

 

[Perbinder]

You can do accounts yourself. You can’t treat or operate on yourself!

 

[Scalloway]

The analogy I would use is getting a tradesman to do work for or doing it DIY. Some people have an aptitude for DIY, some don't. When I was a young fellow my brother tried to get me into doing my own car repairs like he did. I quickly realised that I could either waste a day doing a bodged job or pay a mechanic to do it for me and let enjoy my day off.

So you can DIY company accounts if you enjoy the challenge and are happy spending time to soak up the knowledge available here and other websites.

 

[Perbinder]

I appreciate analogies but so far it hasn’t really explained to me what I get for 1000 pounds that I don’t get for 300 pounds. Bear in mind the 1k was for just end of year accounts. The monthly fee lot i really don’t understand what you are paying for Except for access to software which is available for free or for £5 per month

 

[Scalloway]

For a sole trader business if you just produce accounts for an annual self assessment You don't need to do much more than add up the income and expenses. In fact if a sole trader's turnover is under £85,000 all they need to produce is a total for income and expenses.

However limited company accounts are a lot more complicated to produce. For a start they need to compile a Balance Sheet, which is not a requirement for sole traders. The accounts have to be done in a certain format, using terminology that is not always clear to those not in the know. The Corporation Tax return is also more complicated than the sole trader's one.

I worked as an accountant for 45 years. For the last 15 I worked for myself doing self assessments for sole traders and partnerships. For the last few years the business ran through a limited company. Doing my own compnay accounts made me realise that I didn't know enough about it to do company accounts for a client.

 

[paulears]

What you are paying for best case is good advice, good service and a result that is tax efficient. Like any professional service. Any service from building, legal, investment, health have variable pricing and in many cases you can do your own work. It’s a buying decision. Is it good value or a rip off? Legal and accounts are similar. They charge for their time and experience. In a big firm your donkey work might be done by a person on minimum wage, not the firms best and knowledgeable people.

I consider what I pay good value. Others might be paying more or less. You need to trust a professional to work for you with your interests at heart.

in another topic, an accountant is seeking external opinion on a VAT issue, which will have a cost implication, but the alternative is to give safe, perhaps more expensive in the long run advice. Estate agents often cost huge amounts of money for what they do, but people go to the more expensive ones sometimes because they‘ll sell your house quicker? It’s surely down to the customer to decide who to place their money with!

 

[BenCaspian]

First time posting/replying here.

I used to run my own joinery business and would say that if you're competent with your accounting software and log everything correctly then there's no need for an accountant for the size of your business. The software should pretty much take care of your tax returns and all you'll need to fill in for HMRC at the end of the year is the figures that your software spits out.

 

[DWS]

The software should pretty much take care of your tax returns and all you'll need to fill in for HMRC at the end of the year is the figures that your software spits out.

Software is not the magic wand that the people selling it make out, if you put rubbish in you are going to get rubbish out!
How do you know that all the expenses you are putting in are actually allowable business expenses that should be claimed?
What about the end of year adjustments, or claiming capital allowances in the most efficient way?

 

[BenCaspian]

Software is not the magic wand that the people selling it make out, if you put rubbish in you are going to get rubbish out!
How do you know that all the expenses you are putting in are actually allowable business expenses that should be claimed?
What about the end of year adjustments, or claiming capital allowances in the most efficient way?

That's exactly why I wrote 'if you're competent with your accounting software and log everything correctly' as a caveat.

It's worth adding that of course if you don't know what information is or isn't required, or as you say what is or isn't an allowable business expense then seek advice from an accountant.

 

[DWS]

But how do you know that your competent and logging everything correctly?

 

[The Byre]

I used to run my own joinery business and would say that if you're competent with your accounting software and log everything correctly then there's no need for an accountant for the size of your business. The software should pretty much take care of your tax returns and all you'll need to fill in for HMRC at the end of the year is the figures that your software spits out.

OK, let's go through a couple of scenarios -

During the recent C19 madness, grants were made available. Some were discretionary and some were for a fixed sum. Our accountants made us aware of those grants and helped us with the process. Had we not been aware, we would have missed out on a very healthy five-figure end total.

A company wanted to rent a building from us and because this is a non-core income, we were unsure of the VAT implications. The accountants wrote an outline of the CT and VAT consequences.

Which software covers those two instances? (And I could cite many more!)

 

[BenCaspian]

OK, let's go through a couple of scenarios -

During the recent C19 madness, grants were made available. Some were discretionary and some were for a fixed sum. Our accountants made us aware of those grants and helped us with the process. Had we not been aware, we would have missed out on a very healthy five-figure end total.

A company wanted to rent a building from us and because this is a non-core income, we were unsure of the VAT implications. The accountants wrote an outline of the CT and VAT consequences.

Which software covers those two instances? (And I could cite many more!)

Very different scenario than that of the OP, whose question was whether or not he had to use an accountant if he went limited. The answer is no, he doesn't have to, but it's up to him whether or not he has a good enough grasp of his finances and the financial language around the accounting of a business to either manage it himself or hire a 3rd party.

As for my example, I am offering my experience and opinion as I also operated as a sole trader with a similar turnover to the OP. I taught myself to use XERO and used YouTube to make sure I was doing my accounts correctly.

You are absolutely correct that the accounting software will not do the work for you. Nor will it offer advice. It sounds like yours is a much larger and more complicated business and no doubt you benefit from having an accountant.

 

[The Byre]

OK, let's look at a sole trader. A guy I know works from home as a video/film editor. He spent £3,000 on a laptop for doing simple HD jobs and £10,000 on a server for editing 4K film. Which software tells him if he should enter that as IT or capital expense, bearing in mind that the two classes have different depreciation timelines?

What are the tax implications if/when he travels to Studio Hamburg to edit a film there as part of his contract with Pinewood and which software advises him of those implications?

Just because a company is small or even microscopic, does not mean that its problems are simple!

 

[fisicx]

As for my example, I am offering my experience and opinion as I also operated as a sole trader with a similar turnover to the OP. I taught myself to use XERO and used YouTube to make sure I was doing my accounts correctly.

I have a very simple business like you and my accountant saves me thousands each year because he knows all sorts of ways to pay less tax. Financially I’m far better off paying him once each year to do my accounts.

 

[BenCaspian]

OK, let's look at a sole trader. A guy I know works from home as a video/film editor. He spent £3,000 on a laptop for doing simple HD jobs and £10,000 on a server for editing 4K film. Which software tells him if he should enter that as IT or capital expense, bearing in mind that the two classes have different depreciation timelines?

What are the tax implications if/when he travels to Studio Hamburg to edit a film there as part of his contract with Pinewood and which software advises him of those implications?

Just because a company is small or even microscopic, does not mean that its problems are simple!

I agree with everything you have said.

 

[MyAccountantOnline]

I appreciate analogies but so far it hasn’t really explained to me what I get for 1000 pounds that I don’t get for 300 pounds. Bear in mind the 1k was for just end of year accounts. The monthly fee lot i really don’t understand what you are paying for Except for access to software which is available for free or for £5 per month

You may get better service and value for money by paying more, you may not.

What any accountant charges is, just like any other service provider, based on many factors including the level of profit they want to make, the overheads they have, how efficiently they run their practice, etc.

You say you dont understand monthly fees. I cant speak for all accountants, but for most it's simply an annual charge spread over 12 months. It aids the clients and the accountants cashflow.

 

[paulears]

The Byre used the example of is it an asset or something that has no resale value - as computers don't. I had this a few times last year and I needed to explain in detail what it is, and what it is for. When I moved accountants my new one gave me a list of equipment. Tick the stuff you still have - he said. I think out of maybe 30 items, 2 or 3 were still in use, the remainder long scrapped. The old accountants were still gradually depreciating them away! They'd never explained and I didn't know - I probably should have, but didn't.

 

[Canuckalbert]

do I HAVE to use an accountant?​

No

But can you deal with all that's required and ensure you pay no more in tax than is legally necessary?

I've been an accountant for a long time and have seen so many people pay totally avoidable penalties and tax where they've tried to save money on accountants fees.

You will find very good accountants who will charge you less than £150 per month.

Be very aware the tax dept will let you deduct certain expenses for a few years!

Then bang! The tex dept audits you! Shuts down your bank account!
Accountants are cheap. Tax depts audits and fines are not cheap