Run my own accounts and payroll - advice please

**Waldorf** · 2 April 2007, 23:24

Why bother with the hassle?

Get an accountant to do it all!

**Tool** · 3 April 2007, 07:16

Advice: get an accountant.
Because:
- an accountant is much less likely than you to mess up your accounts
- an accountant is knowledgable and will give you good advice
- an accountant will deal directly with the relevant authorities and knows how to handle them
- HMRC is more likely to investigate you if you don't have an accountant, as you are more likely to make errors

Having said that, IANAA!

**chris79** · 3 April 2007, 07:40

thanks for the advice, but really.. if I wanted to do it myself, anyone doing this?

**malvolio** · 3 April 2007, 07:46

Originally posted by chris79

thanks for the advice, but really.. if I wanted to do it myself, anyone doing this?

There are some, mainly those with some sort of accoutnacy background. On the other hand I know of more than a few accountancy-qualified people (like me) who use external accountants. They are cheaper, more specialised (if you get the right one), keep up with Gay Gordon's usually secret tax changes, are more accurate and a source of advice and guidance, so why not use them?

Nothing wrong with doing it yourself, of course, and several of our favourite accountants will let you download spreadhseets to make it easier, but you will need someone to sign off your year-end figures.

**ASB** · 3 April 2007, 08:12

Originally posted by chris79

I'm forming my own limited company to commence contract work on April 6th 2007.

The company will comprise of 2 employees.. myself and my partner (director and company secretary).

I work 37 hours per week normally .. my partner works part time 16 hours per week..

We will both be invoicing from our new company, and equally we wish to pay ourselves a wage out the company and take any leftover profits as dividends...

Ideally I want to do this myself without employing an accountant, as I don't mind doing things (or my partner) sending off invoices, book keeping, company account returns, payroll etc...

What i'm wondering is does anyone here currently do such a setup, and if so what software should I be looking to purchase to do all this.. I was considering quickbooks, but someone has told me today it doesn't have the facility to do dividend payments?...

Also am I right in thinking that as a director i'm not bound by the minimum wage, so I can pay myself £3 per hour to maximise further tax savings (whilst keeping my NI contributions acceptable).

Feel free to rip me apart on this, or praise my post and add to it! I prefer good constructive critisism if it is warranted..

cheers.

In terms of accountancy you are unlikely to save much by doing it yourself - unless you do ALL your accountancy. The likely impact is that your accountant will have to repeat most of what you have done to validate it anyway. however if you appoint your accountants now and work with te format of data they expect it may yield savings.

As a director the NMW wage legislation may (or may not) apply. DTI guidance says it doesn't and HMRC don't chase it. It does appear that there isn't a legal exemption for directors. Do not have a contract of employment with your company or the NMW will apply for duties under that.

You might have some fun with the divis. You tend to work x and your partner y. Dividends are (should be) paid in accordance with the shareholdings - thus you could have some interesting discussions about who gets what and how. It is possible to sign waivers and vary this but it would have a tendency to attract attention. Of course if your partner is also your life partner (awful phrase) then this is probably less of a problem.

From a taxation viewpoint the most efficient amount to pay yourself is (was) 5035. At this point you pay no tax, use all your allowance, pay no NI but get a full years pension credit. Whether you choose to do that or not is down to your consience (it's never troubled me). There was quite a long thread recently which expressed a number of different opinions.

Personally I did all our accounts, but only really so that I knew where everything was pointed. It was no real hassle. I printed it all off at the end of year and gave the accountants the P+L balance sheet etc and justifications. He then produced the formal accounts. Didn't save me much - a couple of hundred quid was all, but at any point I knew assets and liabilities.

**PAG** · 3 April 2007, 08:55

One of the software I have heard people use is SAGE. I don't use it as I have an accountant. Advantage of having an accountant is that he knows how to minimise you tax liability.

You correct in saying that directors are not subject to NMW. However there is a very constructive thread on this forum search for it and you will see both side of the argument.

**philip@wellwoodhoyle** · 3 April 2007, 08:59

The trouble with trying to do things yourself is that no single piece of software does everything - even accountants don't have access to a single "all singing, all dancing" piece of software that does it all. We use five different software packages for every personal service company client we have.

Quickbooks does the book-keeping, VAT and payroll. It doesn't produce accounts in a suitable format for Companies House filing requirements and it doesn't do all the necessary adjustments - you have to work out and enter "journal entries" for things like depreciation, accruals, prepayments, etc.

Quickbooks won't produce the right VAT returns if you are using the flat rate scheme - it is only programmed for the normal or cash accounting schemes.

Quickbooks doesn't do the corporation tax calculations or tax returns. The profit as per your accounts is not the profit you are taxed on. There are adjustments needed for capital allowances & depreciation, non-allowable expenses, non taxable income. Different types of income need splitting and putting in different places on the tax return.

Quickbooks doesn't do your personal tax calculations or personal tax return.

Quickbooks doesn't do the board minutes and dividend documentation.

Quickbooks is no different from the other market leading software, such as Sage, MYOB, etc - none of them do it all. They are aimed at larger businesses with far more transactions.

You need more than a piece of software to keep up with tax planning. We've been busy planning and producing reports for the past couple of weeks since the budget and are currently in communication with all our clients about tax planning strategies over the next couple of years. Also there are interesting developments in use of home as office and "duality of purpose" changes which mean that more expenses should be claimable - very little in the public domain yet. We think we are ahead of the game on tax planning for the next couple of years - how would you know any of this if you didn't have an accountant?

In some ways PSC's are thought to be simple because of the tiny number of transactions and simplicity of book-keeping, but in reality, they are complicated as they require several disciplines, i.e. accounts preparation, company law compliance, payroll, VAT, corporation tax, personal tax, all of which are tightly linked together and impact on eachother.

I have often thought that some enterprising programmers could put a specialist accounts/tax package together for personal service companies, there must be a demand for it, even from accountants. We'd buy it, that's for sure rather than having five different software suites. The problem would be keeping it up to date as you'd be probably looking at 2 or 3 updates every year as laws and compliance requirements change.

So, pay, say £900 p.a. for an accountant to do everything for you and keep you up to date with changes in law and tax planning opportunities. Or pay say £250 for QB software, and another say £150 p.a. for the payroll updates, then spend time researching and trying to keep up to date with tax, VAT and payroll law & practice changes, spend time working out your profits and preparing dividend paperwork, time doing your personal tax return, and then you'll still need an accountant to do the companies house accounts and probably the corporation tax return, costing probably £500 per year. Accountants offering the monthly packages for PSCs are very cheap, especially as many provide the company formation free of charge and provide registered office address and company secretary at little, if any, additional charge, and it really is false economy to try it yourself as you won't save that much money, if any.

**martinb** · 3 April 2007, 09:45

Originally posted by chris79

I'm forming my own limited company to commence contract work on April 6th 2007.

The company will comprise of 2 employees.. myself and my partner (director and company secretary).

I work 37 hours per week normally .. my partner works part time 16 hours per week..

We will both be invoicing from our new company, and equally we wish to pay ourselves a wage out the company and take any leftover profits as dividends...

Ideally I want to do this myself without employing an accountant, as I don't mind doing things (or my partner) sending off invoices, book keeping, company account returns, payroll etc...

What i'm wondering is does anyone here currently do such a setup, and if so what software should I be looking to purchase to do all this.. I was considering quickbooks, but someone has told me today it doesn't have the facility to do dividend payments?...

Also am I right in thinking that as a director i'm not bound by the minimum wage, so I can pay myself £3 per hour to maximise further tax savings (whilst keeping my NI contributions acceptable).

Feel free to rip me apart on this, or praise my post and add to it! I prefer good constructive critisism if it is warranted..

cheers.

Mine is a minority view on these boards - but I do exactly what you are proposing, with one important caveat. I do use an acountant for preparing end of year accounts and calculating and filing relevant paperwork for Corporation Tax. I also use him for ad hoc advice as and when I need it. Everything else I do myself.

For me its not about money, because as others have pointed out, there isn't a huge saving to be made. Its about understanding and keeping control of my business.

I use Quickbooks. It doesn't do everything, as others have pointed out, but it does most things. The things it lacks are no different from any other acocunting software - the most significant for me being that it doesn't do flat rate VAT. Despite what you have been told, I can categorically state it DOES handle dividend payments.

**xoggoth** · 3 April 2007, 09:47

Anyone who thinks using accountants reduce errors must have had very different experiences to me. All the fines/penalties/interest I have paid have been when I used accountants. Another chap told me recently he got screwed big time by the IR because his accountant disappeared with all his records.

Even if you find an adequate accountant, many errors are not in preparing accounts but in the basic record keeping which is still down to you, and as accountants never do proper balances, they don't find out. As a minimum you really should do a thorough check at year end on your own records.

Run my own accounts and payroll - advice please