Blogger
Share this content
0
11
1602

Fee to charge for mid year accounts?

Hi Guys,

I have a few contractors set up as limited companies that have taken out large sums mid way during year as dividend. After a meeting with a hmrc inspector, i was advised that mid year accounts need to be produced to prove that there was sufficient profits in the company for them to be able to pay a dividend and then a resolution / dividend voucher must be issued. otherwise they can try to levy NI if caught out.

I have done this work for these clients but unsure of what sort of fee to charge...

Any suggestions?

Thanks guys.

Replies

Please login or register to join the discussion.

Charge the additional time spent

We do this for quite a few clients. 85% of the work forms the year end accounts so we only charge the addiitonal 15% which is the admin in posting, printing and checking the accounts.

If we are not paid by standing order by the client we charge 50% of the accounts fee + the additional fee for the interim accounts so we are never out of pocket.

Thanks (0)

Time spent

Charge them for the time spent doing the work.

If you believe in value pricing you could discuss the issue with the client and see how much the work is worth to the client. Keep talking to the client until they suggest you charge them for the time spent or go to another accountant.

Thanks (1)

Think

If you think value you think differently.

I think value and the way I see it HMRC has created a problem for your client in terms of higher professional fees. There are a number of options, one is to agree a price for getting agreement from HMRC that management accounts are not needed.

You could argue that they are able to declare dividends because the business is so simple with minimal costs. Just a one page calculation should do. This could save your client thousands over the lifetime of their company.

Let's say we put a notional cost on management accounts of £750 and the client has 15 years work left. That is £11,250. What would you pay to avoid that?

Let's assume you said £1,000...one letter should do it. It will take you an hour (including walking to post it) and a) it could be the most profitable work you've ever done and b) you have saved your client £10,000 and loads of hassle. 

How many clients do you have like this?

When you think value your business model changes. Let someone else to the time consuming low value work. Think differently.

Bob Harper

Crunchers | The Alternative Accounting Franchise

Thanks (0)

You forgot

the 10 seconds to read HMRCs reply that they would expect management accounts.

What HMRC would want, if they cared, would be some calculation of the profit. It could be as simple as movement on the bank account adjusted for non-cash items, etc.

Thanks (1)

Erm...

HMRC don't have the right to require this. There is a danger that if accounts aren't done then you could have an illegal dividend. However if the annual accounts show sufficient profit, there's no issue. It depends on the client's attitude to risk, not the opionion of an HMRC employee.

Thanks (0)

What is needed

Before a payment of a dividend can be made the directors must have confidence that there are sufficient undistributed profits.

HMRC wouldn't say you don't need management accounts. They may advise management accounts but some calculation seems necessary.

Thanks (0)

Hmm

So you mean you can't just make up the dividends when you do the year end accounts and backdate all the paperwork so the dividends fit in with the directors' personal tax affairs anymore? You actually have to have something to show there was enough profit to pay that big fat dividend in month 4 and that dividend must stay in month 4 rather than be spread throughout the year.

Yes, I am being sarcastic but its what my current employer has been doing for years and when I told them it was wrong they said do it anyway...

Thanks (0)

New employer...

Peter, may I suggest you find a new employer...

Thanks (0)

Miss

MissAccounting wrote:

Peter, may I suggest you find a new employer...

 

I have come to the conclusion that is most likely my best course of action.

Thanks (0)

No fee as you would seem to have wasted your own time. There is none of Bob's precious "value" here.

next time I would suggest if HMRC suggests something you check:

What does the legislation say?

What does HMRC's manuals say?

What are the penalties for non compliance and are they enforced?

That way you will know if they are talking nonsense or not, if if as it would appear here what they are asking for (and correctly, as Peter says how can you declare a divi if you dont know how much profit there is?) is taken out of context and is inappropriate for your small clients.

I do ours in a 3 line P&L if they look a bit iffy, and make sure clients sailing close to the wind know how to compute it themselves. Takes about 5 minutes for a consultant.

 

 

 

Thanks (0)

Principle

@YouReallyShouldKnowBetter - many experts can do things quickly, that doesn't mean there is no value. Experts are quick because they've spent years learning. How long is takes has no bearing on value.

The key point I am making is that if you think value you think differently; rather than thinking of a price to do something you focus on preventing it If you have bad teeth you can do to the dentists for fillings or brush more regularly and stop eating sweets.

In this situation (as far as I can see) HMRC has told the accountant (rightly or wrongly) that they need to produce management accounts. The accountant should tell the client and give him/her their opinion with some options/recommendations.

The value is taking away the threat and/or the cost of doing what HMRC say. These could include doing nothing and accepting the risk. Another could be doing some workings (like you do), full management accounts or getting agreement/clearance from HMRC on the approach and perhaps teaching the client how to do them.

Bob Harper

Crunchers Accountants

Thanks (0)