Im a subcontractor/sole trader plasterer in the construction industry. Ive been self-employed for 7 years. I work for a large building contractor who sends me to several properties a day to do the plastering. My average yearly take home is about £25000, with expenses totalling on average £3500. Ive always done my own tax returns.
I have some questions and wondered if anyone would take time to answer them.
Ive always collected all my diesil receipts, tool receipts, Mot, tax, repairs, insurance public insurance, and a few other things which i felt related to my job. The deisil and running costs made up the bulk of my expenses.
1) Ive always put these in the allowable expenses box, is this correct.?
2) About 4 years ago I bought a van for £2000 and back then I put this in the capital gains box, was this correct?
3)Last month I bought a van for £3000. If/when I do next years online return 11/12. Im thinking of going the mileage route for my expenses. Does this mean I CANT inlcude the cost of the van.?
4) How do I PROVE my mileage to the tax man should he wish to see my books? I understand to keep a daily log of my journeys, but how do i prove it to them?
5) Do I still keep the deisil receipts?
6) If I want to get a mortgage, the lenders like to see the last 3 years of accounts. Ive been told I need an accountant to certify my accounts. What does this mean?
7) Would an accountant go over my last 3 years of accounts if I paid them? I ask, because I just have a carry bag of receipts for each year and have never wrote anything down.
I understand I ve made a mistake as Ive never done any bookkeeping, but now with me wanting to get a house its time to try and rectify a few issues.
1) Looks about right 2) No you would have been able to claim capital allowances on this - back then, the rules were slightly different, you probably would have had a FFirst Year claim of 50%, then it would have been 25% of the reducing balance in the following years. It shouldn't have been entered as a capital gain. 3) Correct. If you claim mileage, you cannot claim any other motor costs, including servicing, insurance, one off repairs and as you thought the capital cost of the van 4) You can't! But by keeping a log you are showing that you are taking your responsibilities seriously. You may wish to keep a track of total mileage, so you can show how your business mileage compares. 5) You can do, it won't hurt and it can be a way of backing up your mileage claim. 6) It sounds like the lender isn't prepared to accept your figures, and want an independant accountant to confirm the earnings. 7) I would have thought so, there will obviously be a cost, but it sounds feasible.
Number 7: You could use a Bookkeeper , rather than an Accountant to sort your accounts out into a presentable format for the Bank's to accept. Would be much cheaper and in my experience Bank Managers don't know the difference between the two. I know because I was one
By the way, this isn't a pitch for the business, just thought given which forum this is it was worth pointing out!!
Number 2 i made a mistake, I meant capital allowance box..I think its now called AIA.So I put the full 100% £2000 in.
Does this mean I would get into trouble if my books were looked at by the tax man.?
How many years do you have to keep all your records for?
The reason I asked about the mortgage lender is because I heard its standard practice that lenders wish an accountant to overview your accounts if your self employed. I havnt approached a Lender as of yet.
Sorry - I thought accountant/book-keeper were the same job, a bit ignorrant on my part, apologies. So are you saying its best get a book-keeper to go through my previous 3 years accounts and then get them checked by an accountant for the purpose of a mortgage lender?
Don't worry, you are not alone in confusing the status of bookkeeper / accountant - funnily enough there is a discussion going on about this right now...see here:
Keeping records - Here is HMRC's brief explanation.....don't you just love how simple they make everything.....
Taxpayer must keep and preserve records relevant to tax liability
Under Self Assessment taxpayers are required both to keep and preserve the records needed to make a correct and complete tax return for any period.
It is virtually impossible to produce an accurate return of profit without keeping records of one sort or another. Many taxpayers already keep records, often for business management purposes and general reasons of prudence, if not specifically for tax purposes. But the formal requirement to keep records discourages taxpayers who might otherwise choose not to keep or retain records of an adequate standard in the hope that HMRC would then only have evidence to support a relatively low estimate of profits made.
Period for which records must be kept
Where a notice to file is issued at the normal time the relevant records must be kept until the later of:
the date on which a formal enquiry into the tax return is treated as complete (see SALF500)
the date on which it becomes impossible for any such formal enquiry to be started
in the case of a taxpayer with a business the fifth anniversary of the 31 January next following the year of assessment (the five-year time limit applies to all records, not simply the business records)
in any other case, the first anniversary of 31 January next following the year of assessment.
Where a notice to file is issued after the normal time, but before:
the fifth anniversary of the 31 January next following the year of assessment (in the case of a taxpayer with a business))
the first anniversary of 31 January next following the year of assessment (in any other case),
the record keeping requirement is the same as that in the first paragraph of Period for which records must be kept above.
But where the notice to file is not issued until after the dates given in the second paragraph of Period for which records must be kept above the record- keeping requirement only extends to those records still in the taxpayer's possession at the time the notice to file is received. These will be the only records, if any, that the taxpayer uses to complete the tax return. Any such records must then be kept until the later of:
the date on which a formal enquiry into the tax return is treated as complete
the date on which it becomes impossible for any such formal enquiry to be started.
For example, most employees are correctly taxed under PAYE and do not need to be issued with notices to file a tax return each year. Where, exceptionally, an employee is issued with a notice to file a tax return after the first anniversary of 31 January next following the year of assessment concerned he or she would only be expected to retain those records used when completing the tax return.
In practice if you keep everything for a minimum of 6 years you won't be far wrong. They can chase you for up to 20 years records if accused of fraud but that is another matter.
Yet another thread you will find useful asks about what lenders will take with regard to mortgage / loan applications - it's worth a look..
Back to your final question, in your specific situation you have already and seem to be perfectly capable of submitting your own self assessment tax return. A good bookkeeper will be able to sort your bags of receipts out and put them into an acceptable 'Final Accounts' format that most Lenders would happily accept. E.g. a Profit & loss Account for the last 3 years showing how much money you have made and therefore proving serviceability of the required loan. Just make sure that you get a good bookkeeper - in just the same way as your Building Contractor wouldn't sub just anyone to plaster his buildings.
You will probably* not need an Accountant - you just need to prove to the lender that you can afford the loan. A Bookkeeper would charge anything from £10 per hour to £30 per hour. An accountant would probably* charge £40 per hour upwards.
Going forward it may be worth you calling on a regular bookkeeper to keep your records straight and submit your tax return each year. I bet it wouldn't be as expensive as you think and would give you loads more time for
I'm off for some and
*Lots of assumptions made such as you are a sole trader and that you are not asking for any specific tax advice. I'm sure some accountants would charge less and some bookkeepers more but these seem to be the industry average.
I think Im going to go through all of my receipts myself and seperate them into, vehicle running costs, tools etc. Is there a template or certain format that i should do when recording all the information?
After Ive got everything into order and written down Ill approach a Book-keeper.
I'm situated between Hednesford and Heath Hayes just outside Cannock.
Quite happy to take on three bags of receipts, invoices, bank statements, etc. and turn it into three years accounts.
Once I have your books in some semblence of order I can approach one or two local accountants that I know on your behalf to get them approved. Or if you prefer I could just bring your books up to date and then pass you on to a good local accountant.
Once I've had a look over the information that you have I should be able to give you some idea of a price for my side of the work and of course using my services will keep any follow up accountancy fee's down.
By the way, I don't charge anything for the first hours consultation. That's just to see if we can work with each other and look at the magnitude of the work required.
Do you have your accounts from four years ago as a start point?
In addition to your documentation for your business I'm also going to need to perform Money Laundering procedures to check your identity but it's all pretty painless. If you've got a passport and a couple of utility bills you're just about there.
Get in touch, an hours chat over a coffee won't cost you anything but your time and we'll see where it goes from there,
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Ha ha I was just about to post the following......
'Shaun will be along shortly......'
@Nick (niceman) Shamus (shaun) is one of the most knowledgeable dudes on here and you will be in very safe hands. Why bother with it yourself when you can get a man in to do it is what I live by. Well, for most things
The plain brown envelope stuffed with used fivers is in the post
-- Edited by Shamus on Tuesday 12th of July 2011 07:54:06 PM
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
, rather than an Accountant to sort your accounts out into a presentable format for the Bank's to accept. Would be much cheaper and in my experience Bank Managers don't know the difference between the two. I know because I was one 
in your specific situation you have already and seem to be perfectly capable of submitting your own self assessment tax return. A good bookkeeper will be able to sort your bags of receipts out and put them into an acceptable 'Final Accounts' format that most Lenders would happily accept. E.g. a Profit & loss Account for the last 3 years showing how much money you have made and therefore proving serviceability of the required loan. Just make sure that you get a good bookkeeper - in just the same way as your Building Contractor wouldn't sub just anyone 
to plaster his buildings.
and 
