Reply to: Accountant made a errors

[psychocandy]

Sorry no fish here.

Yes paid via DD and yes I am the owner of the Ltd company.



Indeed this is the only reason for the business account and the only money in their is for liabilities.

Guys its pretty easy to live in hindsight here as many are more versed in how to manage accounts etc. If my accountant got his bit right then my money for liabilities in the account would have floated perfect.

It does not matter if the company retains any of the profits to FLOAT the account for mistakes like this, as I can re invest the money back into the business if something else goes wrong again in the future or just not take any dividends until the balance is null.

I always keep a float of 7k for emergencies in my personal account if I am out of work etc. The point was that this was bad timing if you read the post #1.. Remember I had just bought a house and got married. Contract at the time was for 12 months and termination on both sides is 10 weeks.

I have learned so much ref "what" my liabilities are and how they are calculated. Yes I knew of all the amounts coming out and I had challenged them in December 2011 regarding the lack of funds avail for these transactions due at a later date. They advised I was waiting on a rebate from HMRC and also some expenses had not been processed yet. Turns out the rebate of 1k from HMRC was not attributable to the 4k+ I was down..

Yes I admit naively I did accept their response but then again this is why I pay a professional to do the work for me. Where I work my client does not double check everything I do as that would be a mere waste of man hours and shows a lack of trust.

The accounting firm is good. They have a linked API to my account daily and adjust for any expenses in real time. At your place of work as some of the other contractors you work with if they understand their accounts. I did the same at mine and I just got blank expressions back. Perhaps the more old and bold on here take the high pedestal and perhaps should not judge any one new here trying to gain some advice.

I do appreciate some of the advice here and responses. I will check out the war chest now

Only £7K personal money in case you aint got a contract? Do you spend the rest then?

Not sure if I'd be happy with £7K only = about 3/4/ months living at a push.

First thing I did when I got back to contracting is build up minimum of 6 months personal money. Currently up to about 12 months worth but be happy when its closer to 2 years.

That way I dont crap myself when contract ends or get pressure to take stuff in locations I dont want.

[malvolio]

So I am pretty happy with this result

The trick is not to have got it wrong in the first place... But I guess you've gathered that.

[Southern Fairy]

As I mentioned in my first post, I would get a reply back today regarding any form of compensation. They have refunded me £1000.00 + 2 months free accounting and reduced my accounting fee by 50% for 1 year.

A total refund of £2040.00 from the 4K they mistakenly calculated which resulted in me going overdrawn. We agreed blame on both sides and came to middle ground on the issue.

It just goes to show that some accountants are willing to take responsibility for their mistakes, even if they are not compelled by law to do so...

So I am pretty happy with this result

[Southern Fairy]

There is a niggling feeling that the OP is spinning a story here. However, the one question I have is... can you pay your Corp Tax by Direct Debit? I have never had this arrangement, and haven't researched it either. For VAT, I pay by Direct Debit. I still can't believe the OP didn't know beforehand about his Corp Tax obligations, as well as how much is in their Business Bank Account. I do wonder who is actually the Directory of the OP's Ltd Company.... I smell a fish or a rat, not sure which one yet.

Sorry no fish here.

Yes paid via DD and yes I am the owner of the Ltd company.

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

Indeed this is the only reason for the business account and the only money in their is for liabilities.

Guys its pretty easy to live in hindsight here as many are more versed in how to manage accounts etc. If my accountant got his bit right then my money for liabilities in the account would have floated perfect.

It does not matter if the company retains any of the profits to FLOAT the account for mistakes like this, as I can re invest the money back into the business if something else goes wrong again in the future or just not take any dividends until the balance is null.

I always keep a float of 7k for emergencies in my personal account if I am out of work etc. The point was that this was bad timing if you read the post #1.. Remember I had just bought a house and got married. Contract at the time was for 12 months and termination on both sides is 10 weeks.

I have learned so much ref "what" my liabilities are and how they are calculated. Yes I knew of all the amounts coming out and I had challenged them in December 2011 regarding the lack of funds avail for these transactions due at a later date. They advised I was waiting on a rebate from HMRC and also some expenses had not been processed yet. Turns out the rebate of 1k from HMRC was not attributable to the 4k+ I was down..

Yes I admit naively I did accept their response but then again this is why I pay a professional to do the work for me. Where I work my client does not double check everything I do as that would be a mere waste of man hours and shows a lack of trust.

The accounting firm is good. They have a linked API to my account daily and adjust for any expenses in real time. At your place of work as some of the other contractors you work with if they understand their accounts. I did the same at mine and I just got blank expressions back. Perhaps the more old and bold on here take the high pedestal and perhaps should not judge any one new here trying to gain some advice.

I do appreciate some of the advice here and responses. I will check out the war chest now

[d000hg]

I don't pay my hotel bills, rent from lodging, flights or train fares from my personal account as they aren't personal expenses.

You earlier mentioned "most importantly rent/mortgage".

Keeping money for business expenses is a different matter as the rest of us already covered.

[SueEllen]

Again, what does this matter? If you run your business in a tax-efficient way you are very unlikely to live off the salary, but on savings you already took out as dividends. So who cares if your company has no money, all your bills are paid from personal accounts.

I don't pay my hotel bills, rent from lodging, flights or train fares from my personal account as they aren't personal expenses.

[jmo21]

Fair enough. Is that a special ING account? I used to use them for savings when it was 5%

1.99% fixed for 12 months - no charges/penalties that I can see.

[d000hg]

I presume all your clients are local to you, they are all through agencies so you are on the same invoice cycle each time and you never take a month or more off out of choice?

Again, what does this matter? If you run your business in a tax-efficient way you are very unlikely to live off the salary, but on savings you already took out as dividends. So who cares if your company has no money, all your bills are paid from personal accounts.

[d000hg]

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.

Fair enough. Is that a special ING account? I used to use them for savings when it was 5%

[eek]

I presume all your clients are local to you, they are all through agencies so you are on the same invoice cycle each time and you never take a month or more off out of choice?

No why would it matter? What does the amount of money retained within a company account have to do with invoice cycles?

[SueEllen]

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

I presume all your clients are local to you, they are all through agencies so you are on the same invoice cycle each time and you never take a month or more off out of choice?

[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.

[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]

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! )

[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.