How important is it to have a local accountant?
Discussion
How important would you say it is to have a local accountant that you can meet with face to face?
I'm a sole trader, so my accountancy requirements are pretty minimal, but the next few years for me are all about getting a mortgage, so I need accounts prepared by someone with the appropriate letters after their name. I'd prefer to use a local accountant, but not sure whether I'd spend enough time dealing with them to get any benefit. What do you reckon?
I'm a sole trader, so my accountancy requirements are pretty minimal, but the next few years for me are all about getting a mortgage, so I need accounts prepared by someone with the appropriate letters after their name. I'd prefer to use a local accountant, but not sure whether I'd spend enough time dealing with them to get any benefit. What do you reckon?
thebraketester said:
If you are wanting a mortgage the your accounts will be very simple. Don't put any expenses through to enable you to maximise your 'net' income. That's what they look at when they request your SA302 forms.
Yep, that's my thinking. The thing is, we have a specific move date in mind due to my wife's work ... by which point I will have two years' accounts (just) but the SA302s will miss off several months of income in year one, due to starting part way through the tax year. I'm told that some lenders will accept an accountant's letter in place of an SA302, providing they have the appropriate qualification. That qualification looks to be fairly standard, but it does mean I couldn't do the accounts myself or get a basic bookkeeper to do them.
People should realise that the SA302 has very little legal standing.
Firstly, the SA302 only reveals what the taxpayer has submitted to HMRC.
Secondly, under the Self Assessment system, HMRC does not verify or agree what is submitted on the tax return so the SA302 lends no extra credibility to the figures shown on it.
Thirdly, in most cases, HMRC doesn't automatically generate an SA302. Usually, a specific request needs to be made to HMRC for them to send one out either to the taxpayer or the tax agent. This can take up to 14 working days.
Firstly, the SA302 only reveals what the taxpayer has submitted to HMRC.
Secondly, under the Self Assessment system, HMRC does not verify or agree what is submitted on the tax return so the SA302 lends no extra credibility to the figures shown on it.
Thirdly, in most cases, HMRC doesn't automatically generate an SA302. Usually, a specific request needs to be made to HMRC for them to send one out either to the taxpayer or the tax agent. This can take up to 14 working days.
Eric Mc said:
People should realise that the SA302 has very little legal standing.
Firstly, the SA302 only reveals what the taxpayer has submitted to HMRC.
Secondly, under the Self Assessment system, HMRC does not verify or agree what is submitted on the tax return so the SA302 lends no extra credibility to the figures shown on it.
Thirdly, in most cases, HMRC doesn't automatically generate an SA302. Usually, a specific request needs to be made to HMRC for them to send one out either to the taxpayer or the tax agent. This can take up to 14 working days.
You are correct Eric. However, this does not stop the Lender asking for them. They will not accept your own print off.Firstly, the SA302 only reveals what the taxpayer has submitted to HMRC.
Secondly, under the Self Assessment system, HMRC does not verify or agree what is submitted on the tax return so the SA302 lends no extra credibility to the figures shown on it.
Thirdly, in most cases, HMRC doesn't automatically generate an SA302. Usually, a specific request needs to be made to HMRC for them to send one out either to the taxpayer or the tax agent. This can take up to 14 working days.
They will usually take the average of your last 3 years so having less than 2 years may be an issue. Approach Sarnie on the Finance section.
Jockman said:
You are correct Eric. However, this does not stop the Lender asking for them. They will not accept your own print off.
They will usually take the average of your last 3 years so having less than 2 years may be an issue. Approach Sarnie on the Finance section.
I know all that. Except, a year or so ago, The Council of Mortgage Lenders (which includes all the major banks and building societies) actually stated that their members should not really be asking for SA302s for the reasons mentioned by me above i.e. they are really not worth the paper they are printed on due to their legal status of confirming nothing.They will usually take the average of your last 3 years so having less than 2 years may be an issue. Approach Sarnie on the Finance section.
The trouble is that many banks don't seem to have taken on board this decision.
The problem is compounded by the fact that agents cannot access SA302s directly using their agent's on-line portals and the lenders seem to only accept an SA302 that has been issued by HMRC (even though HMRC do not stand by any of the figures shown on it).
I wonder what the lenders will do when Self Assessment is abolished in three years time. There will be no paper forthcoming from HMRC at all.
Irrespective of what they should be doing, our experience of taking out a mortgage three years ago (when my wife was already self employed) was that the lenders are all about the SA302s!
It's a stupid situation where I'm comfortable enough to take a larger tax hit to bump up my net income, yet I have difficulty convincing the mortgage lenders of that fact. What annoys me even more is that my job is completely geographically independent. I could work from the moon if they'd let me, so moving to the other side of the country is no issue for me. Yet, if I took a PAYE job - one that would disappear the moment I move beyond commuting range - I wouldn't have this problem!
It's a stupid situation where I'm comfortable enough to take a larger tax hit to bump up my net income, yet I have difficulty convincing the mortgage lenders of that fact. What annoys me even more is that my job is completely geographically independent. I could work from the moon if they'd let me, so moving to the other side of the country is no issue for me. Yet, if I took a PAYE job - one that would disappear the moment I move beyond commuting range - I wouldn't have this problem!
JackRatt said:
Irrespective of what they should be doing, our experience of taking out a mortgage three years ago (when my wife was already self employed) was that the lenders are all about the SA302s!
It's a stupid situation where I'm comfortable enough to take a larger tax hit to bump up my net income, yet I have difficulty convincing the mortgage lenders of that fact. What annoys me even more is that my job is completely geographically independent. I could work from the moon if they'd let me, so moving to the other side of the country is no issue for me. Yet, if I took a PAYE job - one that would disappear the moment I move beyond commuting range - I wouldn't have this problem!
The reason why they are now over reliant on SA302s is because for over 10 years they decided they didn't need any sort of evidence at all - apart from what the individual verified themselves i,.e. self certification.It's a stupid situation where I'm comfortable enough to take a larger tax hit to bump up my net income, yet I have difficulty convincing the mortgage lenders of that fact. What annoys me even more is that my job is completely geographically independent. I could work from the moon if they'd let me, so moving to the other side of the country is no issue for me. Yet, if I took a PAYE job - one that would disappear the moment I move beyond commuting range - I wouldn't have this problem!
The thing is, the SA tax return is actually a form of self certification anyway. All the lenders are doing is relying on the self certified declaration of income to the tax man rather than a separate self certification to them directly.
Prior to the introduction of Self Assessment, the Inland Revenue (as was) issued genuine tax assessments - which were true legal documents and were only issued when the tax authorities had checked and agreed what had been submitted by the tax payer. Self Assessment removed the requirement of IR (later HMRC) to "agree" anything.
As for getting SA302s, the only way to obtain them is to telephone HMRC and request that they send the relevant three year's worth of SA302s to you by post.
Eric Mc said:
As for getting SA302s, the only way to obtain them is to telephone HMRC and request that they send the relevant three year's worth of SA302s to you by post.
The main reason I'm after an accountant is that I'm told some mortgage lenders will also accept accounts prepared by an approved professional (or words to that effect) in place of SA302s. We have a specific move date in mind. I won't have two full tax years of SA302s at that point (i.e. my assessed income will be reduced due to the portion of the first year that I spent on PAYE), but I will have traded for two years. So having an approved accountant may give me an extra option when it comes to the assessment.
(I realise only having two years of accounts will reduce my options compared to those with three plus, but there are credible lenders who will consider that...)
Eric Mc said:
What the lenders requires is very inconsistent. Many are happy with just SA302s. Most, in my experience, will ask for SA302s AND an accountant's certificate of some sort.
Best thing is to ask them what they actually require.
I'm a year away from even the possibility of being accepted. My logic was that an accredited accountant increases my options if I do need a certificate when the time comes while doing it myself or getting a local bookkeeper to do so rules out some of the options. It certainly can't hurt.Best thing is to ask them what they actually require.
You should be using an accountant anyway 
However, when SA goes, nobody knows what HMRC are planning regarding accountants and tax returns. It seems they will want sole traders like you to submit to them what they call a "Quarterly Update" i.e. every three months they will want you to upload to them the entire contents of your computerised bookkeeping and accounting system. Not having a computerised bookkeeping system will not be accepted as a reasonable excuse for failing to send in the three monthly return.
At the moment, HMRC has no plans to allow accountants the ability to submit these "updates" on behalf of their clients.
However, when SA goes, nobody knows what HMRC are planning regarding accountants and tax returns. It seems they will want sole traders like you to submit to them what they call a "Quarterly Update" i.e. every three months they will want you to upload to them the entire contents of your computerised bookkeeping and accounting system. Not having a computerised bookkeeping system will not be accepted as a reasonable excuse for failing to send in the three monthly return.
At the moment, HMRC has no plans to allow accountants the ability to submit these "updates" on behalf of their clients.
Eric Mc said:
At the moment, HMRC has no plans to allow accountants the ability to submit these "updates" on behalf of their clients.
I'm sure the chancellor will be all in favour of more work for the financial establishment. To be honest, my accounts should be incredibly simple. I work from home, occasionally pay for petrol or accommodation to attend an event and keep track of all the work I'm commissioned to do. If it wasn't for the mortgage consideration I'd probably have a crack at it myself.
Having said that, I am now about to reveal the depths of my current naivety...
I've enquired with a couple of accountants - some of whom quoted a figure to do my 'tax return and accounts' and some of whom just mentioned one or the other. Is that just phrasing or are they actually two separate things? My understanding was as a sole trader all I needed from a tax/legal point of view was self assessment.
Edited by JackRatt on Monday 11th April 16:58
The basic tax requirement is that you submit a self assessment tax return, part of which will contain some very basic information about your self employment profit or loss.
HMRC will accept (without agreeing) such a submission on the understanding that a full and detailed set of accounts exists that will support the figures showing on the return. There is no legal obligation to supply these more detailed accounts to HMRC UNLESS HMRC asks to see them - which will usually be part of a "Self Assessment Return Enquiry".
Therefore, to forestall any such enquiry, MOST accountants, when submitting the self assessment tax return to HMRC, will also forward to HMRC as part of an overall package the following additional documents -
i) a full set of accounts covering the trading figures for the sole trader activity - including a profit and loss account and balance sheet
ii) a detailed set of business tax computations which will include various adjustments to the profit from the accounts such as "Private Use" restrictions and "Capital Allowance" claims.
iii) further detailed schedules related to other non-trading entries on the tax return
iv) an overall Income Tax and Class 4 National Insurance liability computation
If you feel you can handle HMRC without any of the "extra" information generally supplied by accountants, that is entirely your choice.
HMRC will accept (without agreeing) such a submission on the understanding that a full and detailed set of accounts exists that will support the figures showing on the return. There is no legal obligation to supply these more detailed accounts to HMRC UNLESS HMRC asks to see them - which will usually be part of a "Self Assessment Return Enquiry".
Therefore, to forestall any such enquiry, MOST accountants, when submitting the self assessment tax return to HMRC, will also forward to HMRC as part of an overall package the following additional documents -
i) a full set of accounts covering the trading figures for the sole trader activity - including a profit and loss account and balance sheet
ii) a detailed set of business tax computations which will include various adjustments to the profit from the accounts such as "Private Use" restrictions and "Capital Allowance" claims.
iii) further detailed schedules related to other non-trading entries on the tax return
iv) an overall Income Tax and Class 4 National Insurance liability computation
If you feel you can handle HMRC without any of the "extra" information generally supplied by accountants, that is entirely your choice.
Eric Mc said:
The basic tax requirement is that you submit a self assessment tax return, part of which will contain some very basic information about your self employment profit or loss.
HMRC will accept (without agreeing) such a submission on the understanding that a full and detailed set of accounts exists that will support the figures showing on the return. There is no legal obligation to supply these more detailed accounts to HMRC UNLESS HMRC asks to see them - which will usually be part of a "Self Assessment Return Enquiry".
Therefore, to forestall any such enquiry, MOST accountants, when submitting the self assessment tax return to HMRC, will also forward to HMRC as part of an overall package the following additional documents -
i) a full set of accounts covering the trading figures for the sole trader activity - including a profit and loss account and balance sheet
ii) a detailed set of business tax computations which will include various adjustments to the profit from the accounts such as "Private Use" restrictions and "Capital Allowance" claims.
iii) further detailed schedules related to other non-trading entries on the tax return
iv) an overall Income Tax and Class 4 National Insurance liability computation
If you feel you can handle HMRC without any of the "extra" information generally supplied by accountants, that is entirely your choice.
Thanks. So if one accountant quotes a fee for 'tax return and accounts' at three times the price that another quotes for a tax return, it's fair to assume they are actually offering more. I emailed a couple and basically just said 'what would you typically offer for a sole trader'.HMRC will accept (without agreeing) such a submission on the understanding that a full and detailed set of accounts exists that will support the figures showing on the return. There is no legal obligation to supply these more detailed accounts to HMRC UNLESS HMRC asks to see them - which will usually be part of a "Self Assessment Return Enquiry".
Therefore, to forestall any such enquiry, MOST accountants, when submitting the self assessment tax return to HMRC, will also forward to HMRC as part of an overall package the following additional documents -
i) a full set of accounts covering the trading figures for the sole trader activity - including a profit and loss account and balance sheet
ii) a detailed set of business tax computations which will include various adjustments to the profit from the accounts such as "Private Use" restrictions and "Capital Allowance" claims.
iii) further detailed schedules related to other non-trading entries on the tax return
iv) an overall Income Tax and Class 4 National Insurance liability computation
If you feel you can handle HMRC without any of the "extra" information generally supplied by accountants, that is entirely your choice.
When would HMRC typically ask to see the accounts? Isn't there an argument that says hold on and then ask the accountant to do it if summoned? I personally have no need of additional analysis on my finances, it would be there purely for HMRC and possibly the mortgage lenders.
JackRatt said:
How important would you say it is to have a local accountant that you can meet with face to face?
Not very important at all.Met my accountants in person once, in 2008 when I started my own business (they are 70 miles from me). Never met them since, everything done via phone, email and post.
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