Accountant made a errors

[SueEllen]

You clearly cannot do your own accounting as any prudent business person ensures their company has money in their business account for emergencies.

What happens if you don't work for a year? It happens to a lot of contractors at some point for various reasons.

If you are already clearing your account out then you will have serious problems paying your bills and most importantly rent/ mortgage.

As already suggested take what you are offered from the accountant. In addition follow the advice to check what you sign, put VAT and corp tax in a separate account, and finally search these forums for "warchest".

[d000hg]

You should be setting aside amounts from the company income received to cover your VAT & Corporation Tax. I would suggest that you set up a seperate account and transfer the appropriate amount each time you receive payment.

That still wouldn't help if £thousands extra is charged than you planned for - you'd just end up in the red in a different account!

You clearly cannot do your own accounting as any prudent business person ensures their company has money in their business account for emergencies.

What happens if you don't work for a year? It happens to a lot of contractors at some point for various reasons.

If you are already clearing your account out then you will have serious problems paying your bills and most importantly rent/ mortgage.

That doesn't make any sense. If you take all the money out of the Ltd whenever possible, you would get in the situation the OP described but that doesn't mean you don't have any money, only that the company doesn't. Keeping money in your company account to make sure you can pay your personal bills seems silly, you don't have to take a salary if you're not working.

[eek]

Keeping money in your company account to make sure you can pay your personal bills seems silly, you don't have to take a salary if you're not working.

+1 Why on earth would you keep money in your company account unless you have to for tax reasons.

[malvolio]

Totally disagree, running with less than £5k to spare isn't marginal.

Clearly it isn't, if you don't know your liabilitiies...

However agree with the points about why you didn't check your CT return... even if you didn't spot the missing lease (quite possible) didn't you know in advance how much you were going to pay?

More to the point, I read the OP as taking out all the money he can via regular divis, regardless of trading position and regardless of potetnial coverage for down time. That's simply irresponsible, but hey, it's his money and his court case. What is worrying is thinking that you can operate a limtied Company and have no idea of your legal responsibilities.

[northernladuk]

+1 Why on earth would you keep money in your company account unless you have to for tax reasons.

Maybe to cover an **** ups... as per this situation? Even if it just a month ahead to cover an mistakes with client/agent paying would be essential if the OP is running her finances as bad as this. I agree use it if you can but one month float isn't a lot to ask in such a long time contracting.

[d000hg]

Maybe to cover an **** ups... as per this situation? Even if it just a month ahead to cover an mistakes with client/agent paying would be essential if the OP is running her finances as bad as this. I agree use it if you can but one month float isn't a lot to ask in such a long time contracting.

I suppose what you count as a 1 month is the issue though... I'd call it my salary plus expenses for the month, not what I pill for a month... so more like £1000. A float to cover accidentally paying your CT is going to have to be pretty big

[northernladuk]

I suppose what you count as a 1 month is the issue though... I'd call it my salary plus expenses for the month, not what I pill for a month... so more like £1000. A float to cover accidentally paying your CT is going to have to be pretty big

Indeed. I personally leave a lot more in but I would think enough to cover one months billing in case the client/agent doesn't pay on time would be minimum so you don't over divi yourself, particularly if the OP isn't checking properly. I didn't mean float to cover CT, just any problems with cash flow within a month at minimum.

[ThomserveBAS]

I run my business with a minimal business balance - I get 0.01 (or thereabouts) interest for my money whilst sat in my HSBC Business account so I;

• Siphon off about 33% into an ING account (earning 2% interest) to cover business tax liabilities
• Leave enough money in the account to cover monthly business expenses (accountant, phone)
• Withdraw everything else as a mix of salary, dividends and travel expenses

I have been contracting for 4 months and set myself a target of setting aside 6 months worth of salary which I achieved in November - this is sat in a mixture of ISA's and P2P lending lending schemes and attracting interest between 3-6%

In the short time I've been contracting I've found this model works for me but I've had only one PAYE cycle and one VAT cycle - I might reevaluate the situation after 12 months of PAYE/VAT/CT payments if I'm wildly off.

I maintain a spreadsheet (that I built myself) that tracks;

• My transactions line by line
• My income
• My regular outgoings
• The amount of dividends taken/remaining
• The amount of VAT due
• The amount of CT due
• Various other things of interest

So I'm confident I have a good understanding of the financial health of my business and that is backed up by what the accountants advise me to do.

Incidentally I'm with Brookson and have nothing but praise for them. Got 4 months of free accountancy coming up as I've recommended people who have moved from both SJD and InTouch due to various issues. My only criticism would be they appear quite large and you never seem to talk to the same person twice so the personal element isn't there - but the rest of their service has been faultless to date /touches wood.

EDIT: I do take NLUK's point about having some contingency though so am planning on upping my running balance a bit to cover for cashflow issues (prime example - I won't be getting paid this week as despite me filling my online timesheet on time, every time, it hasn't been approved yet and the deadline was 10am! Oh well, double-bubble next week! )

[d000hg]

Siphon off about 33% into an ING account (earning 2% interest) to cover my tax liabilities

Surely you can't use one account to cover both personal and business tax liabilities... you should pay your personal tax from your personal account and the company should pay CT/VAT from a company account?

Or do HMRC not care as long as they get paid... I'd be worried that taking the money out of the company account even to set aside for tax isn't permitted?

[ThomserveBAS]

Surely you can't use one account to cover both personal and business tax liabilities... you should pay your personal tax from your personal account and the company should pay CT/VAT from a company account?

Or do HMRC not care as long as they get paid... I'd be worried that taking the money out of the company account even to set aside for tax isn't permitted?

Sorry I should have been clearer - by "my" tax liabilities I meant "my business" (i.e. VAT, CT)...

ING account and the HSBC Business current account are both linked so quite legitimate to move money between the two.