Many small business owners ponder over what size their company should be before they employ the services of a Chartered Accountant. With tax authorities becoming more and more predatory, it is essential that the management of a small business seeks proper professional advice. A search for a firm of Chartered Accountants should be made early in the life of the company.
Financial records must be kept in a form that is readily available should there be a VAT inspection or some query from the Inland Revenue. A proper accounting of all financial activities is best carried out by an, at least certified, accountancy practice.
You will find the guidance you receive to be well worth the expenditure. In addition, if there is an emergency, the support given in dealings with banks or tax officers is priceless.
As an example, what follows is a true event in the life of a small business of good standing. The directors had a a nightmare six months that would have been far worse without the support of their accountant.
The directors had sold one of their two properties and placed the funds in a deposit account attached to their personal bank account. They subsequently sold their residence as well and moved into another property, using the funds from the deposit account to refurbish it.
All of this was transparent and above board. Imagine their distress when the Inland Revenue decided they were to be the subjects of a tax inspection. Fortunately, they had employed a good Accountant for some years; in fact, within months of the formation of the company. They were able to largely leave the business side of things to be dealt with by their accountant. They had enough to do dealing with the questioning about their personal banking, loans, credit cards, investments, the list goes on and on. The disruption to their personal and business lives was immense. This was in spite of the fact their accountant was dealing with 90% of the work.
They had moved twice in a two year period and were asked to produce personal documents dating back three years. It was not difficult to recall how a deposit was made in their bank account of £4500, but imagine being asked to account for £128.00 or £212.53! Like most people, although they were on top of maintaining their business records. It was a different story where their personal stuff was concerned. Having been subjected to two moves, it was stored in boxes in lofts, cupboards and even the garage. Any document requested was the subject of a long search.
After several months of disruption, the tax office was finally satisfied. There was a small discrepancy resulting in a tiny amount of tax being underpaid. It was a mistake on the part of one of the directors and it was resolved without penalty.
But, why were they singled out for an inspection? It was made clear from the start the tax office had evidence of something suspicious. It turned out that when the directors submitted information to their chartered accountant for their tax return, they had overlooked the interest on the funds deposited in their deposit account. It was only about £350, but this was picked up by the taxman, who was then convinced there was some form of undeclared income.
It seems that banks and other financial institutions have to supply records to the tax office. When something exceeds a certain undisclosed sum the related tax return is checked for disclosure. It was one of those silly things that is easily overlooked but can cause a lot of trouble and wasted time.
Fortunately, the accountant was able to act on their behalf. There is little doubt that tax authorities have more respect for a professional accountant than they do for an individual under scrutiny, and about whom they have doubts.
Employing an accountant enables the small business owner to get on with running the business where, generally, all his energies are required. So try to factor into your budget the relatively small sum required to secure the piece of mind, support and invaluable advice, available from a firm of chartered accountants.
Author Resource:-
Chris Cardew has an interest in the promotion of small businesses both on and offline For more details visit SmallBusinessWebSiteServices.co.uk
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