This policy explains what we expect from our clients in terms of records for accounts and returns, and how we address any problems.
This policy does not change our Terms of Business, which form the contract we have with clients, but helps to amplify and explain them.
Terms
Confusion can arise from terminology and conflation of terms. It is helpful to set out our use of terms:
- Bookkeeping – a basic record of a business’s financial transactions such as income and expense, including VAT accounting.
- Accounts – the annual Profit and Loss Account and, in some instances, also Balance Sheet.
- Tax Return, including Self Assessment – the return of taxes to HMRC.
- Records – your bookkeeping along with supporting documentation such as bank statements, invoices and receipts forms your Business Records.
Process and Responsibilities
These principles cover Sole Traders and Partnerships, Companies and LLPs, and Property businesses, e.g. Landlords.
Your Bookkeeping is used to prepare your Accounts, and your Accounts form the basis of your Tax Return.
The starting point is that you are responsible for your Bookkeeping, and your accountant is responsible for preparing Accounts and Tax Returns.
In some circumstances you may contract some or all of the Bookkeeping to ourselves or to a third party, e.g. a Bookkeeper.
Bookkeeping may be manual or digitalised, and in the case of the latter may be with a spreadsheet or an accounts package, e.g. FreeAgent. Under Making Tax Digital some businesses are mandated to keep digital records for VAT and/or Self Assessment.
Standards for Bookkeeping and Records
Our fee quotes are based on a minimum standard of bookkeeping.
We don’t expect perfection as, pragmatically, it’s our job to sort out problems.
But we do expect a semblance of order in what is provided to us.
Normally this would be:
- A summary of transactions with appropriate analysis. Where paper records are used, these should be totalled.
- Where a business bank account is used, a bank reconciliation document clearly showing the link between the bank statement and the records.
- Cross referencing of income and expenses to supporting documents such as receipts and invoices.
- For VAT registered clients using normal VAT accounting (as opposed flat rate), expenses to be shown net of VAT
- For VAT registered clients using Flat Rate VAT expenses to be shown inclusive of VAT, and the Flat Rate VAT payment shown separately.
- Supporting workings should be made available showing the link between each VAT Return and your records.
- Business and non-business transactions should be clearly separate.
- Your records of income and expenses should be complete and reflect all sources of transactions, including bank, cash, card, PayPal and similar.
What Do Our Terms of Business Include?
Relevant extracts from our Terms of Business:
9 – Responsibilities
a – Your Tax, VAT and NIC affairs are your responsibility; we act only as your agent. It is your responsibility to:
i – maintain accurate records for accountancy, audit or taxation purposes, including HMRC Digital Obligations, e.g. Making Tax Digital for VAT;
ii – consider the accuracy of accounts, tax returns or other documents which the practice prepares for you, before you sign them;
iii – ensure that elections, forms, returns or accounts which are subject to a statutory time limit are made on time;
iv – make sure we get copies or originals of all forms, assessments or other documents sent to you by HMRC or Companies House on which you wish us to advise or take action.
10 – Preparation of Accounts
a – We will prepare your accounts from your records, incorporating any other verbal or written information given. In preparing these accounts we will endeavour to identify and correct any material errors found in your records, and where appropriate advise you accordingly.
b – We will draw your attention to any major deficiencies, errors or omissions which we discover in your records or accounting systems.
c – It is your responsibility to maintain accurate and reliable accounting records for the purpose of our drawing up accounts.
d – Unless specifically agreed we will not be responsible for maintaining or preparing a nominal ledger or Statutory Accounting Records under the Companies Act. Our own working papers do not constitute a nominal ledger or Statutory Accounting records.
What Happens If Your Records Are Not Adequate?
We take a pragmatic view, and if there are small errors or problems, we will work around them and/or make corrections.
If there are more substantial errors or omissions from your records, or defects which mean we cannot use your records for preparing accounts, then we will seek instructions from you, normally giving you the choice of:
- making corrections; or
- us rendering a separate fee for remediation of the records
You will need to be aware that either situation will delay work on your accounts, and may cause filing deadlines to be missed.
If we cannot agree a way forward we may stop work on your accounts, and in some circumstances cease acting for you.
If omissions from records come to light after your accounts have been prepared, we will render a separate charge for incorporating the omissions and amending accounts and returns.
Where We Are Contracted to Assist with Bookkeeping or VAT
If we are contracted to assist with Bookkeeping or VAT, then we will agree with you the data flow we need from yourself for us to prepare your Bookkeeping.
Our Bookkeeping work can only be as good as the information we are provided with. If information is provided outside of our agreement, including piecemeal, late or incomplete, we may need to renegotiate timescales and costs with you, and returns, including VAT or quarterly MTD submissions, may be late.
Contracting with us for Bookkeeping or VAT does not change the underlying position that record keeping for taxation is your responsibility.