Life without an accountant
I know what you're thinking: I wonder how Jake's new company is coming along. Well, glad you asked. We're doing ok thanks.
Today is a special day as I've just been to the bank for the first time, to pay January's wages in. Might not sound like much, but, for me, this represents a huge achievement. Mainly because I am going through the whole process without an accountant. Now, I know that the cost of an accountant is less than the money you could earn in the time it takes you to do your books, but that's not the point. Why should I pay somebody to do something that I can do and that should be fairly simple!? After all, all I want to do is work from home, invoice remote clients and turn their money in to wages in my own bank account. How hard can that be? Very hard, as I've found out over the past few days.
I've run a limited company before, when I was contracting, so I had an idea what was involved. However, that time round I had an accountant (who was bad enough to put me off ever wanting another!) and so I was guarded from just how many forms there are. Since then I've contracted through an "umbrella" company which makes it as simple as can be. That's the way I like life - simple. This morning has been an exercise in patience, as I've made what must be about 10 phone-calls trying to find out how to fill in a P11. What I've noticed is that some of the people I've talked to from the Inland Revenue have been more than willing to help in any way they can, whilst being polite. Some just don't have the time of day for you.
So, here's my Scrooge's guide to book-keeping. Once a month, on payday, call the IR as many times as it takes to get put through to somebody who sounds nice and helpful. Be nice to them and explain what a dim-wit you are. Tell them how much you want to pay yourself that month and listen as they tap away on the calculator before telling you exactly what numbers to put in what columns and just how big your cheque should be that month. No need to cross-reference Table B from "CA38" with "Table SR+B to D"...
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Jake,
The day to day stuff is pretty easy but an accountant should pay for themselves when you are working out the most efficient way of getting money out of the company. The IR are not going to tell you all of the perfectly legal loopholes that can be used.
Plus any half-decent accountant will take on at least some liability for mistakes that get made. Otherwise it can get very expensive!
Matt
Or splash the £70 for Sage Payroll. Piece of piss.. Even I can run it.
---* Bill
Thanks guys.
I'm not that fussed about getting as much as I can Matt. Just want to make a living.
Bill. Do you mean Sage "Instant" Payroll? Sage Payroll is £200+
Does it handle expenses? That's another area I have no idea about. Is that software an expense? I guess so. Do I buy it using the company VISA card then? So many daft questions...
I ring the I.R for all my forms, been doing it for years since my last bad accountant. Year end forms are the best I spend one minute explaining that my accountant sucks (Thats me) I give them totals and they calculate the details over the phone. Then I fill in the form. There very good but I do occassionaly ring again and get a different result.
I have noted that the most helpful people are the people who know what they are doing. A bit like yourself Jake.
I was a self employed developer for 3 years until i fell foul of IR35 and having an accountant saved me much money and time. It also looks good on forms when you apply for anything that they want to know just what you earn.
One other tip. Phone the I.R. and explain that you only get paid at the year end. They will then not expect you to fill in that yellow booklet thingy every month. Then you can the put tax money in the bank until you pay it at year end, just dont spend it.
What John is describing is how you make interest on your tax money, Jake. That's what we plan to start doing shortly. The gov' can have our taxes after we make interest on them rather than them getting a monthly stipend to make interst on for themselves. ;-)
Something else to consider - in the states, you can deduct chertiable contributions. Let's say I am Joe Average wage earner and make $1000 in contributions. I probably get a credit of $500 on my taxes for this generosity.
If you bank the money and make a donation from the business ahead of paying your taxes, you have less capital to pay tax on and in effect, you get %100 credit for your donation. I'm sure it's a little different for you lot, but that's a nice way to maximize your disposable income - should you be fortunate enough to earn enough that it might be considered disposable. :-)
Hey Jerry, when did you fall into the 50% tax bracket? Last time I checked, when I donated $100 I got a $17 reduction in my taxes (plus $6 state).
If you're making enough to get a 50% deduction, you're making enough not to worry or care about the deduction. :)
Cheers!
Luke
Yup - the "instant" does it for me!
bear in mind that in the UK justifiable expenses just get paid straight from your company to you. No personal tax implication till year end. You dont have to actually run it through payroll.
Just make sure that paperwork is watertight - I've been through a VAT inspection, and a Tax inspection in the 8 or years I've been trading. Expenses is the first thing they look for.
Hope this helps.
I'd a truly bad experience with a "bookkeeper". Cost me ten grand in court. Get one you trust, even if only for year-ends and personal tax returns.
My tip is to ask the local lawyers to recommend one. They'll know who's good and who's bad - based on the lawsuits flying around.
And get one thats a Chartered Accountant. Dont bother with "Association of Accounting Technicians". If it goes sour, well. They didnt help *me*.
(Being *real* careful here).
---* Bill
Oh - company credit card gets paid directly by Company. Be careful to only use it on justifiable expenses.. And yes - IT products are expensible. Bear in mind you also get 100% tax writeoff on IT hardware in a year.
Hint: Purchase machine. Knock it off your companies Tax bill at year end.
Nice ...
---* Bill
Jake,
Not sure if your VAT registered (or if you can charge it for clients in other countries) but the flat rate scheme is very good {Link} - for IT its 13% with an extra 1% off for the first Year. This means for the first year you would gain an additional 5.5% on your Gross income.
Mark
I'm interested to know when we'll see the fully functional Rockall design site.
So am I Andy. It's constantly on my mind so it should get done within a month or so.
I guess it's a good thing that I am too busy working to get round to it just yet ;o)
Accountant should save you more than you pay him - I wouldn't recommend 'going it alone' - the Inland Revenue do not make good tax efficient accountants!
I agree with Steve.
As for payroll "Do$h" is good and cheap for small companies and has the new online submission that the IR will actually pay you to use for the first few years!
Jake,
Can you (or anyone) recommend a good umbrella company to use?
Aidan
Aidan. Depends where you're based! In the UK I used Parasol IT (.co.uk) and they are good enough for me to be willing to recommend.
Aidan.
I concur with Jake about Parsol I.T. I have been using them for a couple of years with no problems at all. The only downside is not being about to purchase computer equipment which I can do with my own Ltd. company.
Heres and interesting article regarding the "VAT Flat Rate Scheme" which could save a few pounds.
A Tax break for IT contractors at last!
{Link}
Dont trust any calculation done by the revenue. The incompetant lot [ed] have just sent me a bill based on my turnover because their computer shows I entered the same figures under disallowable expenses as allowable expenses. I never have any disallowable expenses!! Funny how I employ them but dont have the right to sack them all.