As an accountant, often I'm flabbergasted by some of the myths that exist about accounts and taxation. I'm not sure where they come from, but most of them are very wide of the mark. So what's the reality? Time to dispel five common myths about accounting and tax
My polite response is, if this were the case, everyone would do it. Personally, I think confusion arises from the fact there's no income tax or national insurance to be paid on dividends (up to dividend allowance threshold of £5,000). Dividend income over the allowance is taxed at the rate applicable to your tax band (7.5% basic rate, 32.5% higher rate or 38.1% for additional rate tax payers). Also, dividends would have been paid to the shareholder after Corporation Tax had been deducted, so tax has been paid, albeit by the company.
Well you must be able to add up and subtract some numbers, but with calculators and spreadsheets, this really isn't difficult. There are also some user-friendly software packages available if your needs are more advanced. However, I would recommend that you agree your accounting system – whether it be manual, spreadsheet or software – with your accountant in advance. You would be surprised how much of an influence this could have on your fees.
Not only is this incorrect, but your accounts can be prepared by anyone. In fact, anyone can call themselves an 'accountant'. Accountants who are members of the recognised accounting bodies (eg ICAEW, AAT, ACCA, ACA to name a few) are regulated. Fact is – there are no overall regulations in place that govern whether someone can call themselves an accountant. So how do you ensure your accountant knows what they're doing? Well, like anything, I would suggest going on recommendations.
I once received a call from a client who had received a tax bill for £67,000. It was clearly wrong and the matter was sorted out in minutes. Don't just assume that all correspondence from HM Revenue & Customs is correct. Like anyone, they make mistakes, so it's always worthwhile checking – especially if the bill is higher than you expect. Your accountant should always verify the tax calculation and advise on any amounts due. So don't be afraid to query tax bills – HMRC aren't always right.
Not true at all. In fact, most companies would be classified as 'small' and would not require an audit. So what is small? Generally, if your company has a turnover of less than £6.5m and a balance sheet total of not more than £3.26m, no audit is required. There are some exceptions, so it's worth checking, but an audit should be one less thing to worry about.