Doing Your Own Limited Company Accounts
Limited companies are a great way of saving tax, plus separating yourself from the business you’ve started.
But is it worth the extra overhead of running a company? Can you do your own limited company accounts, or is it better to get an accountant to handle all the financial aspects of your business.
I’ve been running my limited company for ten years now. I started the company because after being made redundant in the dot com crash of 2001 I thought it might be worthwhile starting a company in order to become a computer contractor.
As it turned out, I had a bit of a rubbish career as an IT contractor. I only ever worked on one contract, and that was only for three days. I did some freelance coding work, but it wasn’t really enough to justify the expense of running a business.
I did however start a shareware business, and for about eight years that provided the bulk of the company’s income.
While I guess I didn’t really need a limited company for this either, I liked the fact that the business was completely separate from my own finances and responsibilities. I managed to sell software to some pretty big corporations, so I was glad there was plenty of legal separation between myself and the software I was selling.
Difficulties With Limited Company Accounts
I must admit that doing the company accounts has been an annual nightmare. I know exactly why so many people wait till the January 31st deadline to file their self assessment forms!
Starting a limited company in the UK is really easy. But handling Companies House and HMRC is not quite so straightforward.
I used to have plenty of problems filling in the paper based annual accounts to file with HMRC. I’ve moved house many times in the last few years. Different tax offices appear to have different rules when it comes to filing accounts – either that or their employees don’t know their own regulations. So that was a source of problems every year.
Moving to a computer based system hasn’t improved things much. The 2008/09 return worked very well indeed. But 2009/10 went horribly wrong due to some botched HMRC software. I ended up paying my corporation tax and then discovered I couldn’t submit the tax return until HMRC upgraded their PDF document filing software in the new tax year. Needless to say it was another almighty mess that took time and effort for me to sort out.
I think I’m getting to the stage where I need some software to automate the annual accounts processes. Running a business should be easy. I shouldn’t need software to cope with the two invoices I receive each month! But things aren’t made easy for us small business owners.
I guess I’m trapped in that the company doesn’t make enough money to justify hiring a bookkeeper or virtual accountancy service. But at the same time filing accounts is getting ever more complicated, and time spent messing around with HMRC requirements is time not earning money for the business.
One other possibility I’ve explored is moving the company offshore. The corporation tax rate is much lower in Hong Kong than it is in the UK. I do an increasing amount of business in Asia. If my turnover increased much more then I would be very tempted to move the business offshore…
Doing Your Own Payroll
Since I pay myself exclusively through dividends and retain company profits, I’ve never needed to pay myself a salary out of my own business.
I got HMRC to close down my payroll – this might be possible to do if you own a small business and also work full time for another employer. It’s better for HMRC to do this as well, as I remember that they used to send me masses of information about payroll in the post.
If my circumstances change in the future then I will consider opening a payroll. This did look incredibly complicated to run myself. However, I’ve since found there is a wide range of cheap and free payroll solutions available for UK businesses, so I don’t think running your own payroll is as complicated as you might think.
Comments, questions or suggestions about doing your company accounts? Leave your thoughts below.