‘Catch up fees’ when you join a new accountant

If you decide to move to a new accountant, what happens to any accounting paperwork that has yet to be finalised? More importantly, how much will it cost in catch-up fees to bring your accounts up to date?

So, what happens if you decide to change accountants?

Business owners change accountants for many reasons; however, poor communication, customer service and missed deadlines often feature heavily in lists of grievances.

The switching process is relatively simple in theory.

Your FreeAgent, Xero (or other) accounting software account can be easily transferred to your new accountant’s dashboard.

Your new accountant will also require the transfer of all underlying tax and accounting paperwork, often in the form of exported accounting data and supporting records.

You can find out more about the switching process here.

No such thing as a perfect time to move accountants

However good your timing, there is no such thing as a perfect time to move accountants. But many advisors suggest making the move soon after your previous company year’s accounts are finalised.

The reason for this advice is obvious; over the course of a year, the bulk of an accountant’s time is spent completing clients’ year end accounts.

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However, the cost of this work and other duties is typically spread across the year, so contractors typically pay a monthly fee rather than an annual one.

The true cost of completing your annual accounts is likely to be at least half of your annual accountancy fee.

How much unfinished business will you port to your new accountant?

Whenever you decide to move accountants, there is always bound to be some ‘catch up’ work to do to your accounts. Accountants rarely complete and file year end accounts immediately after a client’s year end date.

In fact, many contractors will be used to waiting many months for this task to be completed.

Ironically, long delays (or even missed filing deadlines) are often the catalysts which force business owners to move firms in the first place.

So, in reality, you may need to transfer between 1 and 12 months of accounts data to your new accountant. This is on top of the work required to finalise last year’s accounts.

You could find yourself waiting for your previous year’s accounts to be completed, while already many months into your current company year’s accounting period.

In practice, the amount of catch-up work depends on how organised your records are. If your bookkeeping is up to date, the work may be minimal. If not, your new accountant may need to spend time correcting and reconstructing your records.

How much are typical catch up fees?

As we’ve already discovered, compiling a limited company’s annual accounts is a sizeable task.

A small firm or accountant may charge £500–£800 as a one-off fee to compile your accounts and submit your Corporation Tax Return (CT600) in straightforward cases.

This assumes that your accounts are fairly simple. If your accounts are more complicated, there may be additional time-based or one-off fees.

The annual accounts process involves gathering required information (bank statements, receipts, etc.), preparing the profit and loss statements and balance sheets for each missing year, and then filing the accounts with Companies House.

If your previous accountant and/or company directors have missed any deadlines, there may also be penalties to pay.

Many contractor accountants don’t charge catch-up fees at all

The contractor accountancy market is fiercely competitive, so many leading providers – including our partner firms – often won’t charge your company any ‘catch up’ fees when you switch.

Because contractor accounts are typically straightforward, many specialist firms are willing to absorb catch-up work as part of onboarding, especially where they expect a long-term client relationship.

This should be welcome news to switchers – particularly if you’re coming out of a stressful time dealing with a sub-par accountancy firm.