Having your books audited

[jmo21]

A contractor friend of mine currently uses a book keeper to do his books for him.

They are now telling him he should pay something in the order of £700 for his books to be audited by an external party before they are submitted to HMRC.

They say this reduces the chances of HMRC doing a full audit themselves and actually quoted figures like if you do get the books audited there is only a 1 in 8 chance of HMRC auditing his company, as opposed to 1 in 3 chance if they aren't.

He is the book keepers only "small" client, most are for want of a better phrase "real companies" and not a 1 man limited company contractor, and they reckon that's what all the companies do.

I had no idea whatsoever. Maybe this audit thing doesn't apply if you use an accountant, maybe it's part of their service.

I haven't seen anyone mention this kind of personally requested and paid for audit on here.

Thoughts from the panel?

[Grinder]

Sounds rather dodgy that they're quoting a probability against HMRC audit WTF!

Normally an audit isn't required for a small company (based on turnover limit - I think its £2m but not sure) - you only need an accountant to certify that the accounts have been prepared correctly from the records.

My accountant isn't doing my bookkeeping, but he will be charging apprx £1000 to prepare, certify and file the accounts, as well as other company related services like Annual Returns, advice etc throughout the year.

[jmo21]

I thought it sounded dodgy too, but the book keeper is a family friend his dad has used for years, so he's positive there is nothing dodgy.

[frank size]

Presuming you are a Ltd Co, you do not need an audit unless you turnover over circa £5m.

I guess as a book keeper he/she is using the word audit loosely, i.e. they need a registered accountant to prepare the financial statements. This will give the accounts a lot more credibility which I believe may reduce risk of HMRC visit.

£700 isn't unusual - but it depends on what else has been done and paid for. Better to have got an all in quote for book keeping, accounts, corp tax return, VAT returns and co secretary bits.

[Waldorf]

[URL="//http://www.berr.gov.uk/whatwedo/businesslaw/financial-reporting/small-companies/page45467.html[/URL]

It would appear an audit isn't needed unless you have a turnover of £6.5 million+ OR assets in excess of £3.36 million.

Sounds like you are getting screwed for more cash!

[jmo21]

I'm pretty sure my mate doesn't have millions banked!

if he does, he's getting tapped!

to be clear though, the book keeper isn't saying he HAS TO, they are saying it would reduce his chances of some HMRC audit, and he SHOULD get this done.

[cojak]

I thought it sounded dodgy too, but the book keeper is a family friend his dad has used for years, so he's positive there is nothing dodgy.

Then he's just very out-of-date/lazy/incompetent....

[phileds]

What's an HMRC audit - an IR35 investigation? You'd be better off spending your money on appropriate tax investigation insurance - unless you genuinely are running some complex business, in which case you'd probably have an accountant looking after your affairs as well.

Whatever it is, I find the 1/3 chance of an HMRC audit impossible to believe.

They have enough trouble chasing the tens of thousands of out-and-out fraudsters out there - the idea that they also audit (whatever that means) a third of unaudited accounts is preposterous.

I had my accounts audited for 12 years, a money earner for my accountant. All they did was set up a separate auditing section which then "audited" my accounts (God knows what they did), and I paid £125+VAT per year for the privilege of a sheet of A4 stating my accounts had been, er, audited.

Didn't stop me getting an IR35 investigation either, though that turned out to be a farce, ending when the inspector sent me a letter saying he'd been sick for three months (why that was relevant to anything I know not) and he'd decided to terminate the investigation but retained the right to reopen it when they saw fit.....weird, and a total waste of everyone's time.

Still, what does one expect from a faceless bureaucracy which is almost impossible to stand up to.

[jmo21]

What's an HMRC audit - an IR35 investigation?

presumably it's what Waldorf quoted, it doesn't sound like it's anything to do with IR35

[Alan @ BroomeAffinity]

I suspect it might be a language thing. Many people refer to getting their annual accounts prepared and finalised as an "audit" even although it isn't.

There is validity I guess in the argument that the likelihood of an enquiry by HMRC is reduced if the accounts are submitted by an accountant but I'd question his 1 in 8 and 1 in 3 figures. We submit about 300 CT returns every year and we've only had 4 looked at in the last 3 years.