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Excellent
Thanks Steve - such a relief that I'll no longer have to impose upon, and charge for, stuff that clients (and I) don't give a monkeys about.
Whats the point
I have just run off a set of Micro Entity accounts and they omit so much that they are largely meaningless.
There is no mention of dividends, no notes to the accounts or anything. i.e. information that the likes of mortgage lenders will want to see. So it will create work further down the road when lenders demand to see 'proper' accounts.
I can't see that I will bother with them. The work needs to be done anyway to put the numbers together. With modern software it involves very little additonal effort to tick the box to run off a full FRSSE set. For companies this size FRSSE disclosures are not onerous.
Can't see it saving much time
We'll still have to load the same numbers onto the software (which does the rest), still have to make sure proper accounting policies are followed, etc., etc. Directors' report is still needed. Detailed P & L still needed for tax. And if a micro-entity ever asks me to provide an audit report, I'll run a mile! I know they are "presumed" to show a true and fair view - but do they?
Missing the point
All the extra disclosures, even under FRSSE, and the cost of the software that we use to make it so easy for us, become redundant, which makes it so much easier for businesses to do it themselves.
I'd guess that once my clients & I are happy with the P&L and Balance Sheet in their bookkeeping perhaps 60%-70% of mine would have no problem sticking the numbers into the Govenment's software, with me charging £100 year one to show them how.
As I've said on other threads, we will reach the point where the client gets to the year end, presses one key to submit the VAT return, another their RTI and a third to submit the accounts. Or, more correctly, new businesses will do it themselves (as 30%+ are already doing) without ever thinking of getting an accountant.
Jon's point about lenders forcing the issue was the same doubt cast when Ltd Company's became exempt from audit and then small company disclosures came in. They would not dare to force businesses to increase red tape when a government said it was unnecessary.
No Jon the accounts don't say what the dividends are, and don't even go on about the accounting policies, or director's remuneration, so what? I don't want to waste my time even checking what Iris produces automatically year after year or explain to new clients all that wasted e-paper in the notes. You are right the numbers (in the books), that I'm discussing with them throughout the year, are the important bit, the bit at the end is just some red tape.
Businesses preparing their own Accounts
I would not worry to much, Accounts and taxation are all smoke and mirrors to most clients.
True and fair
I too don't think I'm going to bother with this nonsensical farce that's been dreamt up. It's going to be a nightmare dealing with HMRC side of things. How are they going to deal with these accounts that are nothing much more than abbreviated accounts? And what about Companies House?
I cannot see how the accounts CAN give a true and fair view if all they are is a beefed up version of abbreviated accounts.
Also why have they stopped small companies using the revaluation accounting system? Surely that system produces numbers which are more fairer than cost?
This has got disaster written all over it.
Totally agree... Pointless and ridiculous and will be farcical.
Balance sheet with foreign names... Software
makes it easy...
Continue as we are!
This is as always unnecessary!
BEWARE !
6. In section 444(1) of the 2006 Act (filing obligations of companies subject to the small companies regime)—
(a)for subsection (3) substitute—
“(3) Subject to subsection (3A), the copies of accounts and reports delivered to the registrar must be copies of the company’s annual accounts and reports.”;
(b)after subsection (3) insert—
“(3A) Except where subsection (3B) applies, where a company prepares Companies Act accounts—
(a)the directors may deliver to the registrar a copy of a balance sheet drawn up in accordance with regulations made by the Secretary of State, and
(b)there may be omitted from the copy profit and loss account delivered to the registrar such items as may be specified by the regulations.
These are referred to in this Part as “abbreviated accounts”.
(3B) This subsection applies in relation to the Companies Act individual accounts of a company if—
(a)the company qualifies as a micro-entity (see sections 384A and 384B) in relation to a financial year, and
(b)those accounts are prepared for that year in accordance with any of the micro-entity provisions.”
Am I right in thinking that where a company prepares micro-entities format accounts, the P&L account MUST be included in the public information filed at Companies House?
If so, would your client want you to do this?
BEWARE NOT !
Horse's mouth
Section 6 of: http://www.companieshouse.gov.uk/about/gbhtml/gp2.shtml#ch6
BEWARE NOT indeed
Whoops!
So stuck in the habit of submitting abbreviated accounts that I forgot that s444(1) still applies - a small company must file a balance sheet but doen't have to file its P & L or directors' report.
Kindly disregard original post.
@Paul, you seem pretty up on all of this, must admit to lagging behind somewhat.
The question for me is, will HMRC accept the micro accounts without a detailed P&L?
I am all for reducing paperwork in the downward direction.
Apparently so
@Paul, you seem pretty up on all of this, must admit to lagging behind somewhat.
The question for me is, will HMRC accept the micro accounts without a detailed P&L?
I am all for reducing paperwork in the downward direction.
My understanding is that even before micro accounts, as a detailed P&L is not a statutory requirement, HMRC cannot insist on it as a matter of course. They can of couse open an enquiry and get the information that way. Apparently there are firms out there that as a matter of course don't send a detailed P&L with the CT600.
This being the case it would seem that HMRC cannot defy Parliament's will to deregulate, and so if micro accounts with no P&L are filed then they will have to lump it. Seems to run a coach and horses through the iXBRL regime - if there is barely anything left to tag then what's the point?
As things stand at the moment a lot of firms already give more than the minimum disclosure in FRSSE accounts, for example full fixed assets, debtors and creditors note plus a detailed P&L. We certainly do. It seems that this is necessary to make the accounts meaningful so I foresee continuing with this.
micro accounts & HMRC
HMRC
What the Company Act regulations are, is irrelevant.
HMRC are entitled to receive accounts and or returns which give a reasonable explanation of the business and its activities. If not, HMRC are entitled to raise the dreaded "Aspect enquiry".
Which is why I always attach a set of (Approved & signed) detailed financial statements to ITRs and or CT600s. The accounting and the Personal tax software I use painlessly produces these- PDF and iXBRL.
As far as Co.Hse is concerned I use the Co.Hse formats provided online. Simples!
The software deals with those very few clients not entitled to use "Abbreviated Accounts".
As far as third parties are concerned, the software will also produce what I call "Shareholder" accounts. Something between fully detailed and Companies House.
FRSSE
I do not use FRSSE because: if you use FRSSE you have to check that you meet each requirement thereof. With most of my one or two-person company clients, this becomes onerous. So the accounts are prepared on "Acceptable accounting principles".
Notes to the accounts
Just because, per regulations, notes are not necessary- does not mean you should not include them.
Even the minimum we file at Co.Hse should mean something.
There is an enormous difference in perception between a summary account simply showing e:g: £120k creditors and £10k profit. As compared to the same account containing the note:-
Creditors includes £80k due on director's a/c, Profit is stated after a £100k dividend.
The bottom line is- I really cannot fathom why my beloved colleagues get into such a "TizWoz" over this stuff.
Bare minimum plus detailed P&L - job sorted
We're doing the bare minimum statutory accounts which is basically the shortened directors report, statutory format P&L and BS followed by a sheet giving balance sheet analyses and a sheet giving P&L analyses, both of which will be submitted to HMRC via the CT return. Co House just get the BS. HMRC are happy they get the P&L analyses just like they've done for years when it's been attached to the back of the full accounts.
The benefit is that we don't have all the stupidity of notes and analyses that are not of any remote interest to anyone, certainly not the person who matters, i.e. the client.
What I find really sad is the full circle we've come round over the last 30 years. When I started as a trainee, the limited company accounts were a lot simpler. First, we had the companies act (1982 was it) which brought in the rigid formats, then the auditing regs which meant "proper" audits were needed for even the smallest/simplest family businesses. Then, over the years, these new rules/laws have been watered down slowly and we're now virtually back where we started, i.e. simpler accounts and no onerous audits. What a waste of time, effort and money over the intervening period! Small family businesses should never have been brought into the more rigid audit/reporting regimes in the first place.
For VT users
I have had a good play with VT's formats this morning.
And its quite neat if you are a VT customer.
The default set up sends a single balance sheet sheet (!) to CH, and a more comprehensive set with 'non statutory' bits to HMRC.
You can add in 'padding' if you like, ie the accountants report, cover sheet etc in the normal way. Your practice's call.
The only bit I am struggling on is getting the director's loan to work well as its floating around under the balance sheet. Will come back to that one.
The main benefit I can see from micro entity reporting is...
.....No requirement to disclose related party transaction notes. Therefore not having to ask questions that the client does not understand or even care about.
For me this one reduction is probably enough to get me moving towards using it.
Thanks Ken
Thought it was just me walking through the flock in the wrong direction.....Baaaah!
Iris (as always) has got it sussed, with the addition of a detailed P&L for the client and, if you want, HMRC, with all the tagging pre-done, including now the detailed P&L.
You are so right talking about full-circle, at least we don't still have to prepare accounts in pence and in landscape format.
This is all so reminiscent of the demise of the audit requirement with accountants seeing the change either as a welcome opportunity or a threat to their business and ivory tower.
When I started out, my principal, the senior partner, was FCA and a Chartered Secretary and the firm made great use of his skills in minute writing, drafting Memos & Arts and filling out all those nasty Companies House forms. I've just checked and the Institute of CSs are still alive and kicking, but not for 95% of businesses in this country.
As an aside, he always refused to keep time sheets, seeing them as a new-fangled waste of time from the States, so he continued to quote in advance for his clients' work. Full circle indeed.
just one more thing....
Whilst I agree wholeheartedly that it seems iniquitous that the client should be forced by law to pay for the preparation of accounts containing detailed information which he neither wants nor needs, and HMRC's wants can be easily satisfied under this new regime, there is, however, one more group of people whose wants seem to have been overlooked. The general public. It used to be a common adage that the accounts and audit was the price the proprietors had to pay for the protection afforded by limited liability. That has now been completely eroded for small companies, leaving the way clear for any crook to form a limited company and walk away from the wreckage leaving a trail of debts, with no risk to his personal possessions. I've no idea whether or not such occurrences have increased since deregulation started, and I accept that if the crook is determined enough, he can circumvent any obstacle that is put in his way by laws and regulations. Nevertheless, I do not think that we should overlook the interests of Joe Public as he does, after all, have a stake in all this.
Terry - don't forget HMRC
I have some sympathy was your point and certainly there are thousands of cases where the owners of sham companies have walked off with money taken from Joe (and Janet) Public and other businesses. There are also a huge number of companies run and then stuck off without full (or accurate) recording of profits leading to a millions of lost tax to the Exchequer.
Years ago Ltd Companies were not the norm for small business and so it was reasonable to be able to rely on accounts/audit but now, with millions of the things, and the inability of the government to police it Joe & Janet just have to be wary whenever they part with money.
Then of course you have the rogue traders who learn about accounts & tax (and might even get the qualification) and who produce great looking numbers and can fool the auditors & HMRC, eg Banks & Insurance Companies, any one of which doing as much damage as a million micro-entities.
Update for VT users.
Update: I think I got there in the end. I now have a fully customised set of VT templates set up, slightly more on them than the standard ones but that's just me. I like a cover sheet and an accountants report for example.
Having spent approx 4 hours looking at the rules on this and customising all the templates for my personal preferences there is going to be a saving of approx 5-10 minutes per client plus a few sheets of paper. 90 minutes of this was wrestling with automating the director's loan notes which took a bit of doing to get it all formatted but will avoid having to key it each time and change director(s) and the (from)/(to) which is fiddly are likely to produce errors.
So its going to take me about 30-40 sets of accounts to return today's investment, but 'it all helps' and in some cases it could save 15-20 minutes in some cases on more complex notes which I can now completely ignore for reporting purposes so in the longer term it probably is time well spent.
I like simple and it gets rid of quite a few notes they no-one ever read or understood anyway.
Only niggling doubt is I now need two formats, one for micro and one for abbreviated, rather than one universal set for all but I am pleased.
Best use the thing tomorrow!
Cutting down on down on information in the Accounts
I agree with the comments above and would add if this carry's on soon the Accounting report will be 3 pages long and meaningless, it may effect fees.
Why bother you can abbreviate accounts
This has no consequence so long as those ABBREVIATED ACCOUNTS are available on Co Ho website!!!
In real life.
In real life if you are a careful person, you must remember two guiding principles.
1) The old sail training adage: "One hand for yourself, and one for the ship"
2) The insurance principle. Traveling via commercial airlines is the safest form of transport. Nevertheless because, God forbid, airplanes still fall out of the sky, if we are wise we take insurance. So it is with preparing accounts.
Whatever we do for clients, it should be clear that we have conscientiously done our work.
A cautionary tale: For many years as a sort of favour I prepared acs for a small flat management company. Total income average about £3k. Fee was sufficient to buy a packet of crisps. Any way a couple of months ago the two unpaid directors got themselves into a hissy spat. Reason flew out of the window.
As a result I received a long letter from one of the protagonists, as you do. Its tone clearly indicated that she had swallowed the companies act and various other stuff. Fortunately I had never taken shortcuts on the accounts. So a brisk letter back pointing out the information in the accounts ended my involvement with this entity. The point of the anecdote is never assume that just because it is a "nothing" company, it does not matter. The capacity to cause aggravation has never been related to the size of the client.