What qualifications does my limited company accountant have?

For most limited company contractors, your accountant is likely to be the advisor you engage with more than any other. In this guide, we look at the professional qualifications held by accountants and accountancy firms.

As you’re entrusting the financial well-being of your business to a third party, you need to be sure that your books are in safe hands.

In practice, many contractor accountants operate as regulated firms, with senior staff qualified, but much of the day-to-day work is handled by experienced, though not necessarily chartered, team members.

So, aside from the usual ‘top things to consider’ when choosing an accountant, how do you know that your adviser is technically proficient? See our guide to contractor accountants and whether you need an accountant.

Although you will find many competent accountants without any formal qualifications, a professional accounting qualification carries a lot of weight and demonstrates that the holder has a high level of expertise and experience.

In this guide, we look at what the main UK accountancy qualifications mean in practice.

The word ‘accountant’ isn’t a protected word

Surprisingly, anyone can call themselves an ‘accountant’. It’s not a protected term.

You can set up and run an accountancy firm whatever your experience or skill level. Their only legal requirement is to register with HMRC under the Money Laundering Regulations.

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However, you can only call yourself a ‘chartered’ accountant if you hold the relevant qualifications.

AAT qualification

Many accountants starting out in their careers will usually have AAT (Association of Accounting Technicians) qualifications. There are three levels:

• AAT Foundation Certificate in Accounting
• AAT Advanced Diploma in Accounting
• AAT Professional Diploma in Accounting

These are internationally recognised qualifications and provide accountants with a wide range of practical accounting skills.

Many staff working for accountancy firms are studying for an AAT qualification.

What are chartered accountants?

For an accountant to gain chartered status, they must study the subject to a very high level and spend a number of years in the industry.

Chartered accountants will usually be members of trusted and respected professional bodies, such as:

• the Chartered Institute of Management Accountants (CIMA).
• the Institute of Chartered Accountants in England and Wales (ICAEW).
• the Association of Chartered Certified Accountants (ACCA).
• the Institute of Chartered Accountants of Scotland (ICAS).

So what benefits should you expect to enjoy when you hire a chartered accountant?

Fully regulated

When working with a chartered accountant, you get the benefit of a qualified professional who’s bound by a strict code of standards and ethics. Member firms undergo regular quality and compliance monitoring of their work.

Protection should things go wrong

If you use an unregulated or unqualified firm, you may have less formal protection and fewer routes for complaint or redress if something goes wrong.

Members of the ICAEW, for example, must hold appropriate professional indemnity insurance (often in excess of £1m).

Multi-skilled professional services

As well as helping you deal with the everyday accounting tasks familiar to all small company owners, chartered accountants often offer a wide range of extra services, including investment advice, probate, tax, insolvency and audits.

Although most contractors won’t need to explore these ancillary services, you might at some stage need professional advice on other matters, especially if you’re actively growing a business, or encounter some problems down the line.

Staying current with tax legislation

Another major advantage of having a chartered accountant in your corner is the ability to stay compliant and up to date with changing tax laws.

Regulated firms will typically have access to regular tax updates from their professional body and other sources.

This is particularly important in the contracting industry, which has been disproportionately targeted over the years.

If you’re running a limited company, your accountant should be well-versed in dealing with IR35, the Off-Payroll Rules, and the MSC Legislation.

Wealth of experience

Chartered accountants have to earn their right to be referred to as such, meaning they’ll have built up a lot of real life experience and an ability to make sound judgements.

Contractor accountants and qualifications

One thing to bear in mind when you hire an accountancy firm is that not all of the personnel you deal with will necessarily be qualified.

The firm might be a regulated firm of chartered accountants, but only a few members of staff will be individually qualified.

You will often have an ‘accounts manager’ who will deal with your day-to-day queries, but only a qualified accountant will sign off your annual accounts, or provide certain types of financial references.

But importantly, as long as the firm itself is regulated by a professional body, you know that you have a certain level of protection should anything go wrong.

For most contractors, the key is not just whether an accountant is qualified, but whether they specialise in contractor accounting and understand areas such as IR35, dividends, and company compliance. See also our guide to red flags when choosing a contractor accountant.