New Bookkeeping Client

Sue

I have taken on a new Bookkeeping Client who runs his own Taxi Company. He is Self Employed.

He has now been trading for four years and is expecting to pay tax for the first time this year, he tells me that his Accountant has said that you would not expect to pay tax for the first three years and that he should put £100 a month aside to pay his tax bill.

He also says his Accountant has never looked at his books in the past and just takes his word for it when completing the Tax Return. Having started posting his receipts for the current year I can see he is trying to claim for clothing.

I have not had any dealings with this particular Accountant before so I don't know for certain whether what the client is saying is true.

Is it normal for this time of Industry to not make a profit for the first three years?

DaveP

It depends.

If the year end chosen is 30th April and, for example, the business commenced on 1st January 2008 then there is unlikely to be a profit for 2007/08. The first 12 months trading profit might not be very much and therefore the first reasonable profits might be for the year to 30th April 2009 which would of course not be payable until 31st January 2011, almost 3 years later.

I would worry less about the previous accountant and just make sure you keep everything above board whilst you are engaged.

Sue

Hi Dave

Thanks for the advice.

I have not taken over as the Accountant, I am doing the bookkeeping, it will still be the same Accountant.

I just felt it was unusual why was why I asked for other people's opinions.

My clients year end is 31st March. His Accountant is currently preparing the books for his 31st March 2008, which is his 4th year and so far he has paid no tax.

Sue

Monsoon

Sue
All you can do is do the bookkeeping properly, and hand it over to the accountant, making clear anything that needs bringing to his attention (eg disallowable expenses, new expenditure for FYA/AIA etc).
You will know what his rough profit is having done the TB.
If the tax payable varies dramatically from your estimation (taking into account depn/capital allowances, accruals etc) then I don't know what the professional ethical thing to do is, if you believe it might not be being done correctly.
Just make sure what you do is correct.

Good luck

soni2surv

hi all.
I don't think advising the clients not to submit a tax return for three years is good practice. The clients is more likely to have an investigation when he submits his tax after three years trading.
Due to the fact that the accountants never checks his books, they are unlikely to be well kept and that will cause a lot of stress and money to the clients in the future.
It might mean more business for you if you have to do his books again from his first year of trading.
Good luck...

Sue

Hi

Thanks for all the advice.

As far as I know the Tax Returns have been submitted for the 3 years, it is just that the Accountant has informed my client that you would not normally pay Tax for the first 3 years you are in business.

Sue