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jadavi
02-05-2014, 05:53 PM
Hi I have a bit of an odd quandary: I have had an accountant do my books for the third year. This years net profit is minus! This is after paying two assistants most of the year and claiming for everything we're allowed.

Isn't the taxman going to think this is odd? Should I change my figures to at least break even? (I can choose to not claim for some expenses)

I feel I have had a good year with full numbers and 4-6 nursery children included (higher rate)

Any ideas gratefully received please !

FussyElmo
02-05-2014, 06:00 PM
Hi I have a bit of an odd quandary: I have had an accountant do my books for the third year. This years net profit is minus! This is after paying two assistants most of the year and claiming for everything we're allowed.

Isn't the taxman going to think this is odd? Should I change my figures to at least break even? (I can choose to not claim for some expenses)

I feel I have had a good year with full numbers and 4-6 nursery children included (higher rate)

Any ideas gratefully received please !

If you are making a loss is it worth having 2 assistants?

Fitrix
02-05-2014, 06:11 PM
If your expenses are legitimate and you are living well enough from your earnings I would keep your tax return as it is and congratulate yourself!!

Tealady
02-05-2014, 07:16 PM
It's not unusual for a business to make a loss.

The tax man would only find it odd if you make a loss a few years on the trot as they would wonder why you would be Childminding if you weren't making any money.... and that's straight from the horses mouth (Well the tax man that tutored our Account Course run by the LA)

amyp
02-05-2014, 08:37 PM
Can I ask what your out goings are and what you pay your assistants? I'm just employing an assistant.

Simona
03-05-2014, 07:23 AM
Hi I have a bit of an odd quandary: I have had an accountant do my books for the third year. This years net profit is minus! This is after paying two assistants most of the year and claiming for everything we're allowed.

Isn't the taxman going to think this is odd? Should I change my figures to at least break even? (I can choose to not claim for some expenses)

I feel I have had a good year with full numbers and 4-6 nursery children included (higher rate)

Any ideas gratefully received please !

Sorry for the question but I am confused...were you not aware during the financial year that you were making a loss?
do you not do your accounts every month ?
your spreadsheet every month should tell you every month if you have a surplus or a minus in your finances and your accountant should be able to advice you professionally on this?

It maybe that all you need to do is to tweak your expenses...look at what is absolutely necessary and reduce/avoid the less important.....also revise your fees...when was the last time they went up and are they covering your costs?
remember that many other providers, such as preschools.... have had to do that because with the funding being below the costs all fees went up and a lot became chargeable when it was previously free.


Good luck

jadavi
03-05-2014, 07:37 AM
Thanks

I pay assistants minimum wage.
I don't keep running totals Simona, just a list of expenses and income.

We had a good year. I think the accountant has just dug up every possible expense she can.
We had 8-11 children each day with three of us And me alone when it was 4 or less (nevertheless than three)

We work 4days a week,

Simona
03-05-2014, 07:44 AM
Thanks

I pay assistants minimum wage.
I don't keep running totals Simona, just a list of expenses and income.

We had a good year. I think the accountant has just dug up every possible expense she can.
We had 8-11 children each day with three of us And me alone when it was 4 or less (nevertheless than three)

We work 4days a week,

That is certainly very intriguing...expenses can only be generated by you and your business ...how can your accountant dig up expenses apart from her pay in return for doing your accounts each year?

jadavi
03-05-2014, 07:48 AM
Also I daren't put up my fees

I am - at £4 an hour the most expensive in my area so I daren't put it up, especially with agencies looming and maybe cheaper alternatives for parents.

I expected to be below the taxable level but didn't expect to be minus. I think I need to get it in the plus bracket at least .

I'm going to knock off some expenses to at least break even - ie I charged for our animal care as we have those for the children (Guinea pigs ) and our dog's care. The car expenses can come off as we only use 8 miles a month and we charged for repairs and servicing. A few other things too.

Talking to her today- to find out what ppsa means which she charged as an expense and also depreciation which is different from the 10% wear and tear figure.

jadavi
03-05-2014, 07:51 AM
Amy - a long list of outgoings. We replaced couches this year, put in paving slabs in the garden, replaced our gas fire, cut trees down for safety. Main expense was £11.000 for 2 assistants but they were worth every penny and weren't full time.

jadavi
03-05-2014, 08:03 AM
She charged for everything we are permitted - things I didn't know about ie depreciation. I assume that is the house? I'm going to ask her today.
But that's why I use her as she's better informed than me about what I can claim for.

Chatterbox Childcare
03-05-2014, 04:30 PM
I doubt depreciation is the house if it is the one you are living in.

Depreciation is normally for assets such as buggies, laptops, computers, cars etc...

When you sign your return to be submitted by others you are saying that you agree with the accountant, so ask away all the questions you want.

You are paying her for her expertise so why take off legitimate expenses? This loss can be written off next years profit.

bunyip
03-05-2014, 05:43 PM
Ah, well, if you're using an accountant...................

You've either made a loss after paying accountancy fees, or.......

You've made a loss in the UK but will find your accountant has a set up an on-paper company that has made a huge profit somewhere in the Cayman Islands, or...........

You now own a dog with a few £££thousands in her Monaco bank account.

:D

jadavi
03-05-2014, 06:58 PM
She only charges £50 and is so worth it for what she saved me.

Minstrel
03-05-2014, 09:51 PM
Amy - a long list of outgoings. We replaced couches this year, put in paving slabs in the garden, replaced our gas fire, cut trees down for safety. Main expense was £11.000 for 2 assistants but they were worth every penny and weren't full time.

Are you sure the couches, paving slabs and gas fire are legit expenses?

lizduncan72
04-05-2014, 07:12 AM
Are you sure the couches, paving slabs and gas fire are legit expenses?

Wouldn't the couches and fire come under the 10% wear and tear? Interested in the paving slabs though cos I've just bought some to change our garden from all grass to half grass and half paved for bikes etc!!

jadavi
04-05-2014, 07:44 AM
The accountant said the full cost could be claimed as they were for the mindees.

Simona
04-05-2014, 07:51 AM
Ah, well, if you're using an accountant...................

You've either made a loss after paying accountancy fees, or.......

You've made a loss in the UK but will find your accountant has a set up an on-paper company that has made a huge profit somewhere in the Cayman Islands, or...........

You now own a dog with a few £££thousands in her Monaco bank account.

:D

Sorry Bunyip...I do not understand the link between this discussion and the use of accountants setting up in the Cayman Island...and why the reference to owning a dog??...sense of humour failure or else?

This is a serious thread...maybe you have no confidence in accountants but I feel it is out of place here...as Truss rightly said many cms cannot run their finances correctly ...
I tend to agree with her ..not with the solution she has found mind you ...agencies...but I think we need to take this seriously and try to help cms...although a qualified accountant does do the job very well.


jadavi...I agree with the questions Chatterbox has posted
I think you need to make sure your accountant is sound and knows the rules that govern childminding
Are they qualified to do accounts or just go through your invoices?

No offence.... but their charge is rather low for and what they are claiming a bit dubious....just from what you say because none of us have seen your accounts

There is a vast difference between Wear and Tear, depreciation and what you can claim as 'tax free allowances' which include gas, electricity, water , council tax etc etc

just check for your own peace of mind.

jadavi
04-05-2014, 09:17 AM
Thanks Simona

She is a qualified accountant and charges by the hour. Mine didn't take long as it was her third year.

jadavi
04-05-2014, 09:26 AM
My third year I mean .

amyp
04-05-2014, 07:32 PM
Well done that accountant! So really you did make money but managed a lot of claims! I was worried you didn't make money! The accountant is trained to save you money! X

bunyip
05-05-2014, 09:21 AM
Sorry Bunyip...I do not understand the link between this discussion and the use of accountants setting up in the Cayman Island...and why the reference to owning a dog??...sense of humour failure or else?

This is a serious thread...maybe you have no confidence in accountants but I feel it is out of place here...as Truss rightly said many cms cannot run their finances correctly ...
I tend to agree with her ..not with the solution she has found mind you ...agencies...but I think we need to take this seriously and try to help cms...although a qualified accountant does do the job very well.


jadavi...I agree with the questions Chatterbox has posted
I think you need to make sure your accountant is sound and knows the rules that govern childminding
Are they qualified to do accounts or just go through your invoices?

No offence.... but their charge is rather low for and what they are claiming a bit dubious....just from what you say because none of us have seen your accounts

There is a vast difference between Wear and Tear, depreciation and what you can claim as 'tax free allowances' which include gas, electricity, water , council tax etc etc

just check for your own peace of mind.

That's exactly what I thought.

In all seriousness, the link you are asking for is tax issues and accountancy techniques. The techniques to which I referred are all "legitimate" techniques, used by accountants to "protect" their clients from paying tax. Admittedly, their clients were earning on a somewhat different scale to your average CM, and the clever move of transferring profits and losses between high-tax and low-tax countries is more typical of companies than individuals. But Rosie the bulldog (she of the Monaco bank account worth more than most of us) does belong to an individual UK citizen.

If nothing else, this all goes to highlight the fact that the nature of accounts can be peculiar to the nature of the business involved. In that respect, I'd agree cautiously with your suggestion that what is being claimed may prove "dubious". I also agree this is always tricky without having seen the accounts, and so the forum really isn't going to solve the OP's dilemma. There are signs here that an accountant is striving to push every little thing through the books to bring down the final profit total. I wouldn't like to say whether that will stand up to scrutiny, if it attracts HMRC's attention.

That may or may not happen. As a rule, new businesses are expected to run at a loss for 3-5 years, give or take; then break even for another 3-5 years, before starting to achieve a reasonable profit. But the nature of CMing, even when allowing for the 'household' expenses we can claim (parts of which we'd be paying even without the business) is such that I think HMRC would expect to see a CM make a profit at a relatively early stage. Our costs are proportionately low in relation to most small businesses, and no CM I know has to rely on a business loan for the first five years. I think the OP's 'loss' might stand out as unexpected if they've previously shown a profit, or as unexpectedly prolonged if they've been haemorrhaging money for the past 3 years. As an earlier post said: why would a CM keep going so long if still losing money?

I'm generally rather suspicious of the £50-accountancy thing. The fee is way below my experience of what accountants were charging 30 years ago. Given how much accountants expect to make as an hourly rate, it implies a low level of skill/knowledge and/or a less than thorough look at the client's affairs. As the OP says, "I think the accountant has has just dug up every possible expense she can." It smacks of an accountant making a bit extra knocking out these self-employed tax returns, looking good cos they've saved the client some tax, but will the accounts stand up to scrutiny? If not, it won't be the wonderful accountant having to pay out to HMRC. :(

This is borne out by the fact that the accountant does not appear to have made much effort to explain the accounts. Had they done that, the OP would be in no doubt as to what expenses were in there; she'd know they were all bona fide expenses; and she'd know exactly what the depreciation covered. For one thing, the depreciation bothers me. She can only depreciate assets which belong to the business. If the accountant is depreciating private assets (eg. computer, vehicle, house, etc.) then there will be transfer implications at such time as the OP tries to dispose of them (eg. sell the house or car) or gives up CMing and is no longer running the business. This really needs explaining. A decent accountant would not have left any sort of grey area over depreciation of assets: and identifying which assets she's treated as belonging to the business is absolutely as basic as it gets. :(

VeggieSausage
05-05-2014, 09:48 AM
I don't think you can put through servicing etc of the car unless you do not use that car at all except for childminding and depreciation with regards to childminding accounts is taken into account by the 10% you take off for wear and tear.......

Simona
05-05-2014, 09:58 AM
That's exactly what I thought.

In all seriousness, the link you are asking for is tax issues and accountancy techniques. The techniques to which I referred are all "legitimate" techniques, used by accountants to "protect" their clients from paying tax. Admittedly, their clients were earning on a somewhat different scale to your average CM, and the clever move of transferring profits and losses between high-tax and low-tax countries is more typical of companies than individuals. But Rosie the bulldog (she of the Monaco bank account worth more than most of us) does belong to an individual UK citizen.

If nothing else, this all goes to highlight the fact that the nature of accounts can be peculiar to the nature of the business involved. In that respect, I'd agree cautiously with your suggestion that what is being claimed may prove "dubious". I also agree this is always tricky without having seen the accounts, and so the forum really isn't going to solve the OP's dilemma. There are signs here that an accountant is striving to push every little thing through the books to bring down the final profit total. I wouldn't like to say whether that will stand up to scrutiny, if it attracts HMRC's attention.

That may or may not happen. As a rule, new businesses are expected to run at a loss for 3-5 years, give or take; then break even for another 3-5 years, before starting to achieve a reasonable profit. But the nature of CMing, even when allowing for the 'household' expenses we can claim (parts of which we'd be paying even without the business) is such that I think HMRC would expect to see a CM make a profit at a relatively early stage. Our costs are proportionately low in relation to most small businesses, and no CM I know has to rely on a business loan for the first five years. I think the OP's 'loss' might stand out as unexpected if they've previously shown a profit, or as unexpectedly prolonged if they've been haemorrhaging money for the past 3 years. As an earlier post said: why would a CM keep going so long if still losing money?

I'm generally rather suspicious of the £50-accountancy thing. The fee is way below my experience of what accountants were charging 30 years ago. Given how much accountants expect to make as an hourly rate, it implies a low level of skill/knowledge and/or a less than thorough look at the client's affairs. As the OP says, "I think the accountant has has just dug up every possible expense she can." It smacks of an accountant making a bit extra knocking out these self-employed tax returns, looking good cos they've saved the client some tax, but will the accounts stand up to scrutiny? If not, it won't be the wonderful accountant having to pay out to HMRC. :(

This is borne out by the fact that the accountant does not appear to have made much effort to explain the accounts. Had they done that, the OP would be in no doubt as to what expenses were in there; she'd know they were all bona fide expenses; and she'd know exactly what the depreciation covered. For one thing, the depreciation bothers me. She can only depreciate assets which belong to the business. If the accountant is depreciating private assets (eg. computer, vehicle, house, etc.) then there will be transfer implications at such time as the OP tries to dispose of them (eg. sell the house or car) or gives up CMing and is no longer running the business. This really needs explaining. A decent accountant would not have left any sort of grey area over depreciation of assets: and identifying which assets she's treated as belonging to the business is absolutely as basic as it gets. :(

Bunyip...I am suffering from sense of humour failure a lot at the mo....so forgive my question but I see what you mean

I have never heard of any profession where so much is open to interpretation while disguised under 'legislation and regulation' which keeps changing every other week...we are very patient I think...don't you think to put up with so much ?

I have never come across an accountant that charges by the hour but obviously there are some...I always understood they charge for the service...in this case it would be preparing end of year accounts to be submitted to HMRC to get to how much tax we owe them...that is how I see it but can be wrong ...

Amyp...accountant are not trained to save money...they are qualified to understand what a small business.....and one run from home...can legitimately claim in expenses and tax free allowances, that's how I see it but I am not an accountant...just a CM !

jadavi
05-05-2014, 11:26 AM
It's hard to know how far to trust a professional - this lady worked many years as a registered accountant and assured me she had checked what we are entitled to claim for. She was able to explain everything when I asked. As for her hourly rate... She now runs a shop and does accounting for people on the side so it isn't a big earner for her. I think my job took her 90 minutes which I think is fair for £55 but then prices are very low around here as we are a rural area.

rickysmiths
05-05-2014, 01:32 PM
I would be extremely worried if I was having as many children as you say you have and I was making a loss. I work to pay my bills and to have a holiday etc.

I also think you need to examine your working practices because if you worked on your own with 3 children a day for 8 hours a day and took 5 unpaid weeks a year holiday on the hourly rate you quote your annual gross fee would be approx £18000. ( £32 X 3 £96 per day less expenses)

On your figures for an 8 hour day you take £32 per child you have so the days you have 11 children you would take £352 for the day and pay your assistants on min wage approx £100 of this leaving £250 for your other expenses for the day if you allow yourself £100 for that day you still have £150 to cover expenses and your profit.

If you work more than 8 hours with the children a day and the more days a week with your 2 assistants and 8 to 11 children then the more money you take. Personally i don't see how you can make a loss on the figures you quote and I think you should be sitting down and having a serious chat with your accountant (or find a more competent one who knows about childminding! ) and become more aware of your day to day costs so you can control them.

I have just come out of a lean time in my childminding business and during that time I had to cut right back on what I bought and did because my income was low but I was able to do that because I know what my income and expenses are as I go along. I certainly wouldn't 'adjust' my expenses but I do adjust my expenditure to my income! You always need to have in your mind how you would stand up if the Tax office investigated you. I would also be livid if my accountant added expenses to my accounts without discussing them with me fully before hand. At the end of the day who ever submits my Tax return I am the one responsible for what is in it.

jadavi
05-05-2014, 01:58 PM
Thanks rickysmiths for taking the time to comment and. to worry about me :)

That was the point of my original
Post really - as I have had a good year and had three holidays abroad. I have definitely seen the profit even if it is not clear on the accounts.

I think my profit has been concealed by a number of factors ie one of my assistants has been my daughter who was saving for a gap year trip and I often had her as my third assistant when I didn't really need three adults, ie with only 6-7 children. figuring - well I am helping her achieve her dream trip and at least I can have a two hour break in the day. So some of my profit went in that direction. My total income was about £26,900 And my staff were paid £11,000 of that which is high but a true figure.

Also lots of the standing costs - food, energy, repairs and replacements or improvement were either split or paid in full by my husband which obviously makes it harder to see where my true profit is.

As far as not knowing what the accountant was charging for. That was my own ignorance which was soon cleared up when I asked her. I don't find any of it interesting enough to retain in my head from year to year so always have to ask what abbreviations stand for.

I'm happy with how it was left which was that I made a profit of £148 (previous year was £55) as some of the figures had been guesses (ie how often we had a cleaner as that was cash in hand and she often couldn't come

I am now however scrupulously writing down every single figure that goes in or out so we get it right straight off next year.

Thanks for your thoughts on this