|Will I pay 40% tax on my business income?||Friday Fun – The Accountants Choose songs for Prince Harry|
I have been in the accountancy profession long enough to know that not everyone is a fan of spending their hard earned cash on using us to do their year end accounts and tax returns.
However there are a few reasons why I think it is essential to use an accountant to do your limited company year end accounts….
Can you keep up?
Each year brings new tax changes, forms, systems, laws etc. Have you got the time to keep up with these for the one occasion a year that you need to complete your accounts and tax returns?
How long will it take for you to find out what has changed from last year? Where will you get the information? How can you be sure that you haven’t missed something?
You must file your accounts with HMRC in a format known as iXBRL.
Whilst HMRC do provide a free tool to help you do this, the feedback we’ve had from some, without accounting backgrounds, who have attempted this is that it is not straight forward and does give you error messages without clear direction as to how to solve them.
Many try to use – some fail. What do you do when it all goes wrong?
Of course you could buy commercial tax filing software at several hundred pounds a year to help you fill in your tax return and file the accounts. The software should be able to get you around any errors that the free HMRC system may throw up, as long as you know how to use it.
This is the type of software that a professional firm of accountants would use but they would spread the cost across all of their clients rather than you paying the whole amount yourself.
The ‘2 CT600s’ trap
Did you know that a CT600 corporation tax return can only cover a period of one year? So in your first year of trading you may need two returns as your accounting period could be just a few days over one year.
Assuming that you start to trade from the date that you formed the company, the first accounting periods runs from the date of incorporation to the end of the month following the first anniversary of the year end. It’s complicated!
Fines and Penalties
And what if you get it wrong – HMRC do not allow ignorance as an excuse. In fact their penalty regime was changed recently and says …
“Every individual or business is expected to keep records that allow them to provide a complete and accurate return. HMRC also expects them to check with their agent, or HMRC, to confirm the correct position, if they are not sure.”
HMRC refer to us accountants as agents – so HMRC expect you to have an accountant or to call them to confirm anything that you are not sure about. However, we all know how hard it is to get through to HMRC via their help lines and I would caution relying on the advice given.
About the author
The copyright of these blogs belongs to Elaine Clark of CheapAccounting.co.uk and MUST NOT be reproduced without her express permission.
I am seeing numerous copies of my blogs appearing on the web sites and blogs of other firms of accountants. I’m afraid that it is now time for me to take a tough stance on breaches of my copyright!