Doing the books yourself or not?

[Archangel]

You could always do a half and half approach though, do all your own book keeping, payroll etc, then just pay an accountant to do your year end accounts / CT600.

This is what I do, this year my accountant charged £822 inc VAT. I know I could knock a couple of hundred off this, but can't be bothered at the moment, perhaps next year.

[malvolio]

This is what I do, this year my accountant charged £822 inc VAT. I know I could knock a couple of hundred off this, but can't be bothered at the moment, perhaps next year.

You do realise that for that £822 the Accountant will have repeated all your book-keeping activities to verify your figures...

[xoggoth]

Whether DIY or use accountant it always pays to get to know the tax laws yourself, to check accounts look about right and not rely on accountants getting it right.

I have incurred significant interest and penalties when I was leaving everything to accountants. I once received accounts that bore scarcely any resemblance to the figures supplied, I think some office junior got figures mixed up with someone else's. When I got investigated the accountant was pathetic, just a rambling letter to effect that I not claimed as much as many contractors. It was left to me to point out they had got many points wrong.

[moorfield]

Agree with xoggoth, my thoughts here ....

http://forums.contractoruk.com/516932-post12.html

What has worried me more is not the bookkeeping but the assumptions that my accountants have been making on my behalf without raising with me - particularly the P35 Question 6.

[r0bly0ns]

I disagree with this train of thought.

That assumes that 100% of your time is productive. I.e. you have no slack time.

I do my accounts and it takes 1 hour a month and another 3 at year end.

So that's 15 hours a year. My accountant wanted £900 a year so thats £60 an hour.

Even if you get paid over £60 those 15 hours don't stop me billing clients 15 hours. I just do it when I'm watching a film or something else at home. I can't honestly say I don't waste over 15 hours a year.

Hence the ""

It all boils down to how long you think it will take you v. how productive you would have been in that time.

Some people like to do it themselves and are confident enough that it doesn't take long.
Some people like to pay someone else to do it as they prefer to spend ther time on more profitable persuits / down the pub.

[dude69]

Doing it yourself is not more efficient, nor cheaper. It may give you a better sense of being in control, which is fair enough except that is largely illusory unless you are an accountant. For example, where do you stand on protecting yourself from the proposed FBT provisions, how are you aiming to answer Q6 on the P35/SA forms, do the changes to CGT and capital relief affect your purchasing plans, what is the impact on your net salasry/dividend split by the change to the 10% tax band....?

You make it sound so complex:

FBT, how many £1000/year accountants actually spend any time on tax minimising?

Q6 on P35, quick google search shows plenty of opinions from accountants and others.

100% capital allowances, well-documented and discussed, subscribing to an accountant's newsletter will give plenty of info

10% tax won't change the fact of 23.8% total NI

[Dow Jones]

Well worth it

I have had the same accountant - not IT so-called 'specialist' for over 10 years. I know him well, he charges me according to my t/o, so on a good year it may be into 4 figs, on an average one along the lines that some have previously quoted. I still have to give him copies of bank statements, invoices and my own handwritten and spreadsheet notes. Not rocket science, most of us here over 40 y/o can do it (not sure about the young geniuses that keep posting qns lately), however on any issue with tax/vat, HMRC will listen and accept any points from a professional and/or chartered accountant a lot more than a contractor. My accountant has also sorted out minor issues and even requested time to pay large tax bills on my behalf. I wouldn't begrudge a penny that I have spent on his fees, can't say the same in general though.

[malvolio]

No it's not that complex, providing you know the rules and are aware enough to keep track of all the peripheral stuff (as you and I both are capable of doing it seems). What is dangerous is that someone who doesn't know what they're doing assumes that doing their own books is cheap and easy, and does not significantly increase business risk.

So what I'm really saying is that it is not that hard to DIY but you have to be disciplined and aware of all the surrounding issues, which the average newbie will not be, and that you don't actually save a lot of money anyway.

[dude69]

Yep, agreed.

My rationale is that you have work time and personal time. Work time pays you money so you can enjoy your personal time. Spending personal time on work therefore costs you double; you are using personal time to do productive work that you can't charge for, and you are not getting the benefit of the time itself

So if you were to spend an hour a week, or let's say 50 hours a year, on bookeeping and record tracking and cross-checking and keeping up with relevant legislative, financial and procedural changes and usually charge £40 an hour, you're spending £4k on accountancy. My accountant is one of the more expensive and charges me around £1500 a year. So which option is the cheaper one?

You have to do bookkeeping even if you do have an accountant. He will want a spreadsheet of your transactions.

And as for keeping on legislative changes, it's a rare accountant that's going to call you up and say 'Hi Client, I'm just calling to let you know that capital allowances are changing, it's now cheaper and easier to buy IT equipment and so on'. So the legislative changes you need to keep track of anyway.

So the actual extra work is far less than you claim.

Speaking for myself there is:

VAT payment/return quarterly. This is (invoice 1 + invoice 2 + invoice 3 ) * 13%. If I were to pay an accountant to do this I would not save any time, because I would have to correspond with the accountant send him my invoice details and then wait to be told how much to pay.

So zero hours here.

P35. I just did my third last night. I must admit that PAYE is horribly antiquated and relies on arcane tables, and when I worked it through it turned out that I had paid a bit too much tax by about £2/month. Anyway, this took two hours. Call it three with adjusting the monthly payments. But I get compensated for doing the P35 online. Accountants, AFAIK, are either taking the online payment for themselves, or only passing on half.

In any case, I did notice when I was doing the return that HMRC actually provide a tool to do PAYE for you on the employer's CD-ROM. I tend to bin this, but another one will be arriving soon, and I will start using it rather than sod about with stupid tables. So for next year the time to do the P35 should fall to an hour.

Then there is the Companies House annual return. This takes about 10-15 minutes. No problems here.

Annual accounts and CT600 are the most complicated task of the year. I take my accounts template (which you'd fill out with an accountant anyway) and split this up by expenditure and work out my tax liabilities and so on. Check and double check, and I guess you could say five hours at the absolute outside.

Dividend calculations are something an accountant would do, but I still have to make the payment. The total time I spend on this in a year is one hour at the most

Annual workload for me, max:

5 + 1 + 1 + 1 = 8 hours

So I'm basically saving two days work of expense by doing one day's work in output. Can't say fairer than that. It's like working an hour's overtime at double time for two weeks. I doubt many people would turn that down.

Plus if he makes a mistake and costs me money, he pays for it. Can't remember the last time someone sued themselves for negligence...

Really? I remember plenty of people saying their accountants have made errors, but I don't recall ANYONE here saying they had been compensated for it.

[QwertyBerty]

I actually like doing my own accounts. It's a challenge and I like the sense of control it gives me. The money saved on an accountant is nice but not important as I would probably do it anyway even if I was offered free accountancy. I like tinkering with my spreadsheets. Weird eh?