As a limited company contractor, your accountant is likely to be one of the most important and trusted professionals you will work with. There are a number of contractors who look to manage their own affairs. We explain why this approach may not suit all contactors.
Firstly, there is no legal obligation for a limited company to engage an accountant to manage their accounting and tax affairs. A company is exempt from audit if its turnover is under £10.2 million, and has 50 or fewer employees. Any companies below these limits, has no legal obligation to engage an accountant.
So why do you need an accountant?
You may be incredibly skilled in your profession but it can be time-consuming and difficult to manage all your accounting and tax affairs on your own whilst doing your own day-to-day work.
There are a number of core tasks your accountant will do on your behalf. These include:
Your accountant will also complete a number of smaller tasks on your behalf as part of your engagement which is covered as part of the service.
So you can deal with the accounts?
Even if you can deal with the day-to-day affairs of the company, there will be times when you receive an enquiry from HM Revenue and Customs relating to a tax return, your tax code, or they may even request a compliance visit. To a non-accountant, these situations can be potentially stressful, and are better handled by a professional who will have experience of dealing with the tax authorities.
In addition to this, together with the tax expertise offered by an accountancy firm, a specialist will be aware of specific rules and regulations which affect the contracting industry, particularly IR35. This legislation on its own is a minefield, and if your contract work is caught, your take-home pay will be vastly diminished.
There are several other pieces of legislation which may affect you, including the MSC legislation, Agency Workers Regulations, and Section 660.
Without a solid knowledge of these rules, you may fall fowl of HM Revenue and Customs. Dealing with the accounting and tax affairs of yourself and your company together with ensuring you remain compliant whilst ensuring you meet the demands of you day job is a huge task.
A small price to pay
The monthly fee you pay for an accountancy service is a very small annual expense for a typical contractor, and the tax-saving advice alone is likely to save you hundreds if not thousands of pounds each year. Additionally, if you decide to look after your own accounting and tax affairs, you will not be paid for the additional hours of work this involved.
For the cost involved in engaging an accountant, it gives you the peace of mind that your affairs are being managed correctly and any resulting tax liabilities are reduced where possible due to your accountants knowledge of what reliefs are available. Finally, for the small price to pay, it allows you to spend time doing the things you love doing as opposed to spending your time keeping your accounting records up to date.
If you have any queries or want any further advice, please do not hesitate to contact us on 0161 952 4244.