 The law requires you
to keep business records which are good enough to enable you (or
your accountant) to complete your tax return form each year. If
your books are disorganised, full of gaps or non-existent, you are
likely to find it much more difficult and stressful to fill in your
tax return; and much more expensive if you pay an accountant to
sort it out for you. There is a general rule that any unexplained
money coming into a business is assumed to be taxable, while any
unexplained money going out is treated as personal expenditure and
not allowable. So if your books are incomplete or unreliable you
may end up paying too much tax.The other important
reason for taking book- keeping seriously is to help protect
yourself against the unwelcome attentions of a tax office
investigation. Cash based business are always more prone to attack
by HMRC, and without proper records the taxman is entitled to
estimate your income from your banking records, your lifestyle,
your field reports, your web site, and any other information
available to him. But if you have a good set of records, which you
write up as you go along, then you put the onus on the taxman to
try to demonstrate that your records are
unreliable. |
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There are two golden
rules of book-keeping:
 Keep it simple
- Your life may be so full of excitement that you long for the
opportunity to snatch a few guilty hours of dull turgid
book-keeping. But believe me it will pass. There is no point in
setting up some monumentally complicated double- entry accountancy
system which you fill in religiously for two months only to
realise, after the initial rush of enthusiasm has faded, that you
can't remember how it was supposed to work.Your books need to
fulfil a few basic requirements, and should be simple enough so you
can keep them up to date with minimal effort and a few minutes work
each week.
 Keep it up to
date - As Jane Austen may once have said, there are few things
in life more deadening to the soul than realising you haven't
written up your books for fifteen months and you're faced with the
task of trying to go back and reconstruct your records from a heap
of disorganised bits of paper and hazy
memories.Inevitably 20% of your
receipts will have faded beyond legibility, another 20% will be
missing, 20% will consist of undated scraps of paper bearing
enigmatic but meaningless comments "smelt of fish - £215 -
collect deckchairs - figroll man £14.75 - left umbrella
- Thurrock sink cancelled Friday £325 - ring Sylvia re-roof
shed after 8pm - cancelled window cleaner" and a further 20% will
turn out to be recipes for Trout and Peanut Butter Surprise,
birthday cards you never quite sent and guarantees for garden
machinery.
You won't have a clue
why last November you apparently drew out £750 from a cash
machine in John O' Groats at 3 am, and the following day spent
£372.49 in the Penzance branch of Boots, before paying
£635.23 into your Building Society account in Eastbourne the
same afternoon.
It will take you a
least five times longer to write up your books than if you'd done
it as you went along, and you'll end up continually swapping pens
in a doomed attempt to disguise the date of writing. Even as you
finish you'll know the end result would not stand up to the
detailed scrutiny of an inquisitive seven year old let alone the
sharpest minds at the tax office, and you'll contemplate sending
your accountant an unconvincing "the dog ate my homework"
note. |
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There are lots of
book-keeping and accounting systems on the
market.
If you want to avoid
computerised records and stick with handwritten books then the
simplest solution is get a diary with plenty of room to write down
your income and expenditure each day. The main disadvantage with
doing this is that most diaries run from January to December or
follow the school year: it's very hard to get a tax year
diary.
Alternatively WH Smith
sell a range of account books for the self- employed, all priced at
around £15. Although so far as I know nobody produces an
account book specially for escorts.
Until
now!
Priced at just
£14.95 (plus postage & packing) the TaxRelief Diary
is specifically designed for escorts. It comes in a discreet cover,
it's A5 size so it doesn't take up as much room as a conventional
account book, it's spiral bound so it lays flat for ease of use,
and it comes with a full set of straightforward instructions and
example pages. And it's available here TaxRelief Diary. Please be aware that Lulu.com is a print on
demand service. This keeps the cost down but it does mean you
should allow up to 21 days for your copy to be printed and
delivered.
If you want to go with
computerised accounting records there is a bewildering choice of
packages. But if you have Excel and your accountant acts for
several escorts then it's worth asking if he produces an Excel
book-keeping template you can use.
I would recommend
avoiding most of the popular small business accounts packages.
Software like Sage, QuickBooks, TASBooks, MYOB are all way too
complicated for your needs, as well as being pricey. Sage50, which
many accountants routinely recommend for small businesses, is
£525 plus VAT (that's a lot of blow jobs) - and what's more,
you will hate it. Even Sage Instant is
£129.
A cheap and cheerful
program like Do$h Cashbook (which is £29.50) or a personal
finance package like Microsoft Money (£29.95) will be more
than adequate for your needs.
And remember the
golden rules of book-keeping. Keep it simple and keep it up to
date. |
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Most escorts probably
don't have a separate business bank account. Any income they bank
goes into their personal account, and business expenses are either
paid in cash or from the same account. I would recommend you set up
a separate account for your business, and possibly a separate
credit card for business expenses that you pay by
plastic.
Don't worry. I'm not
suggesting you trot along to your High Street bank and fill in a
form to set up a small business account in the name of "Jane Smith
trading as BustyBunny of Bungay." A name like that won't fit on
your cheque book and you don't want to end up paying business bank
charges.
 What I suggest is
that you get a second personal account and mentally designate it
for your business. And if you pay for hotels and travel with a
credit or debit card then get a second one of those too. All you
need to do then is keep your business income and expenditure in
these separate accounts. Then as your income starts to build up you
can pay yourself from the profits by making a transfer from this
business account to your personal account.There are several
advantages of doing this. First of all it separates your business
and personal expenses and makes it much easier for you to keep
track of your business transactions and make sure you record them
all in your books.
 But there is a more
important reason. HMRC have the right to ask you to produce the
records which support the entries you make on your Tax Return. If
you have a separate business bank account then all you would have
to produce to them is your business bank statements and your
account book. But if your personal and business transactions all go
through the same bank account you could be faced with sending in
your personal bank statements, and then trying to convince the
taxman that the £150 you received in August was from granny
towards the children's school uniforms, and £2,000 came from
the sale of your boyfriend's motorbike and not from an
overnight.What you are trying to
do is protect yourself from the taxman's attentions by having a set
of books and records which are consistent with each other and don't
leave open invitations for questions to be
asked.
Of course if you are
subject to an in-depth inquiry then you may have to produce all
sorts of personal records to HMRC but even then if you can
demonstrate you are careful to keep business and personal
transactions separate, you will be on much stronger ground than if
everything is swilling around in the same
account. |
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 I started my
business on 1 September 2007. Should I keep my records up to 31
August each year, or adopt the end of the tax year as my year
end?You certainly can run
your accounts to 31 August each year if you really must. But if you
do you are likely to get completely confused about how your tax
bills are calculated. What will happen is that your 2007/8 tax bill
will be based on your income from 1 September 2007 to 5 April 2008
- worked out from the number of days in the year to 31 August 2008
which fell before 6 April 2007. Then your 2008/9 tax bill will be
based on the income shown in your accounts for the year to 31
August 2008 - because 31/8/08 falls in the 2008/9 tax year. So
already part of your income has been taxed twice and part of the
income you earned in 2008/9 hasn't yet been taxed. When you
eventually pack in your business there will be an adjustment made
so that over the life of your business all the income has been
taxed just once and nothing has been missed
out.
Of course 5 April is a
damn silly date, so HMRC are quite happy for you to do your
accounts to 31 March each year and pretend it's really the end of
the tax year. So I'd strongly suggest you do your first year's
accounts from when you started on 1 September 2007 up to 31 March
2008, and then do them annually to 31 March.
Whatever you decide to
do will have no effect on the date you pay your tax. Self- employed
income tax is always payable on 31 January and 31
July.
 How long do I have
to keep my business records?Your business records
need to be retained for 5 years and 10 months after the end of the
tax year they relate to. So your records for the 2007/8 tax year
should be kept until 31 January 2014.
 I'm not sure if
some of my expenses qualify for tax relief. Should I put them in my
books?My advice would be to
record them anyway along with a note so that they can be considered
by your accountant.
 I have lost, or
never got, receipts for some of my expenses. Can I still record
them in my books?Yes.
 Can I write up my
books in pencil?Don't do it.
Book-keeping is not about pin-point accuracy and copper-plate
writing. Mistakes are inevitable: if you make a mistake simply
cross it out and write in the correct details.
 I can't be
bothered with all this. Can't I just shove everything in a plastic
bag and get my accountant to do what he's paid
for?You could, but you'll
end up paying an excessive amount in accountancy fees, probably pay
too much tax, and you'll be defenceless if you get selected for a
tax enquiry. And if I'm your accountant, you'll get the kind of
response that you reserve for punters who can't be bothered to
wash. |
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1. Do-it-Yourself
