Excel Docklands Business & Commercial Services
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General Enquiries
Accounts Department
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VAT Departmen

Q: My company has sales of £95,000. Do I have to get the accounts audited?

A: No. With sales of £5.6 million or less, you don’t have to get your accounts audited at all, but you can have a voluntary audit.


Q: Is there any advantage in changing from being self-employed to forming a limited company?

A: While a few years ago, there was a fairly even balance between the two ways of doing business, several changes have been introduced which mean that a limited company is becoming the sensible option for more entrepreneurs. There used to be far more paperwork and record keeping with a company, but the introduction of self-assessment for tax, means that the administrative burden for the self-employed has become heavier. And recently, the limit on turnover for companies, which requires an audit has been multiplied. So if your limited company has sales of less than £1 million you don’t need to get an audit carried out, thus saving money, time and effort. Note this doesn’t apply to plc companies. Suddenly, the extra burden for directors compared to self-employed has gone.

Perhaps of even more interest to you, because it hits you right in the pocket, is the fact that tax rates favours a limited company. A recent report, conducted by The Federation of Small Businesses, concluded that on profits of £15,000, a self employed person may face a combined income tax and national insurance bill around 32 times greater than the equivalent level of corporation tax a limited company would have to pay. On profits of £30,000, meanwhile, a self-employed person would face an income tax and NI bill of £7,234 – some £3,580 more than a limited company would face.

Yet another change in favour of the limited company has been the Chancellor’s decision to phase out retirement relief over the past few years. As a result, the sellers of businesses, which are not companies, have been adversely affected. Company sales can be a lot simpler.
Finally, the limited liability for a company gives some protection (although not complete) to a director compared to the horrors of bankruptcy for the self-employed.

Copies of The Federation of Small Business' report can be downloaded from www.fsb.org.uk. Back to top

Q: We are a very small company with £50,000 turnover. How do we go about doing our own audit? We already have a tidy filing system and do our own VAT return.

A: Small businesses are often tempted to 'go it alone' rather than seek professional help with their accounts – usually this is a cost-saving exercise, but can be a false economy in the long run.

'For example, VAT is a very complicated issue,' says Clive Lewis, Head of SMEs at the Institute of Chartered Accountants in England and Wales. 'Many businesses make mistakes when trying to do their own books, having to turn to accountants to bail them out in the end anyway.

'In short, a business cannot do its own audit,' he continues. 'An audit can only be carried out by a registered auditor, accredited by one of the six UK accountancy bodies. There are around ten thousand registered auditors in the UK and they are generally needed when shareholders or the bank want reassurance that all is as it should be.

'A business must have a turnover of at least £5.6 million before a mandatory audit needs to be carried out,' he says. 'But a company below that threshold can request an audit if they wish.'

Even without an audit, there are several simple yet significant measures that businesses can implement to keep their financial affairs in order. 'It's impossible to underestimate the importance of keeping records of everything,' stresses Lewis. 'This means having a cashbook containing details of all money going in and out, where it's going and what it is for.'

He adds: 'If a business reaches £60,000 turnover it must register with HM Revenue and Customs immediately, as there are fines for failing to do so. Conversely, if revenues drop below £58,000 then it can de-register.'

Even with all these measures in place, Lewis still advocates employing the services of a chartered accountant, say, at the end of the tax year. 'They can ensure everything is in order and the business is complying with all relevant legislation.' Back to top


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