I've been self employed for a few years and have always done my own accounts as tbh there wasn't much going on, some incomings and few expenses as I mainly did jobs via other businesses so I didn't have to worry to much about materials etc. However in mid 2012 I started on my own properly, and stopped working for other firms. I was now seeking my own work, buying materials, invoicing etc. It was abit of a slow process getting the business to make enough money and by early 2013 I couldn't live on what I was bringing in and ended up having to get a normal employed job.
Anyway, when the time came for completing my 12-13 SA my accounts were abit of a mess, So I did my accounts as follows:
worked out my incomings/outgoings when I was doing jobs for other businesses in early 12, added my handwritten invoices amounts for the year THEN, I simply went into my business account which I opened when I started on my own properly in mid 12 and simply added up all my incoming for 12-13 and my outgoings for the year. I didn't go through what reciepts I had etc, as I wasn't too concerned as I'd not made that much money.
fast forward to now and I have a letter about a compliance check for 12-13 on everything.
Obviously this has scared me abit. So I've been reading up on doing my accounts properly and realised how wrong I'd been to do it as above. So I've started working through all my accounts for that year and have found that both my income (orig approx £40k) and expenditure (original approx £30k) are actually alot less than I put down. The profit is roughly the same, but my expenditure has gone down by about £9000 and income by about the same. (I'd included in my income a loan from my StepDad to startup the business properly, and had included in every expendture, basically any cash withdrawals which I have no reciepts for their use and personal expendature)
I was pretty open on the phone to HMRC (not sure if thats a good thing or not) and said I'd done my accounts wrong and have done them purely on a cashflow basis - what ever comes in minus what goes out (also after reading up more on accounting have realised you cant to accounts on a cashflow basis until 13-14, but should be based on Invoiced jobs and expenditure). And so told them I was working thourgh my accounts again properly.
Will there likely be penalties for a large difference in my declared income/expendature?
Will I likely get penalised for my original poor accounting even if the final profit works out roughly the same?
Is it worth just going to an accountant - I don't particuarlly have money for an accountant, but If it would stop me getting a big bill/penality is it worth it?
Any help or advice on any aspect of the above would be appreciated