What does a limited company accountant actually do?

If you run your contracting business through a limited company, you can look after the accounts yourself, but most directors use an accountant.

Most specialist limited company accountants charge a fixed monthly fee.

Based on our recent analysis of the leading firms’ current prices, an accountant can cost between £75 and over £200 per month, plus VAT.

Many leading firms have different levels of service (tiers) which are priced accordingly.

In our experience, the “gold” or “VIP” packages offered by some firms often include add-ons that aren’t essential, such as business insurance, “free” IR35 reviews, and similar extras.

This isn’t to say that many of these extras aren’t useful or worthwhile – particularly for first-timers. However, seasoned contractors and small company owners should be fine with just ‘core’ features.

In practice, most limited company accountants offer very similar core services. The main differences tend to be the level of support, responsiveness, and the amount of bookkeeping or tax planning included in the monthly fee.

Although the cost of an accountant varies considerably, there are a number of core responsibilities that all accountants should carry out for their clients.

Here, we look at the initial (start-up) duties, ongoing responsibilities, and some add-on extras that you might need.

Start-up accountancy tasks

When you first sign up with a new accountant – many do so before forming a company – there are some initial start-up tasks which need to be carried out.

Many firms will set you up as a new client for free (including company formation), although others charge a fee for such things.

It is best to check before you sign up to find out exactly what is included.

Here are the key start-up tasks:

Company formation

It is surprisingly simple to set up a company these days. In fact, you can do it yourself for a relatively small fee via Companies House.

However, the terminology and the entire incorporation process may seem unfamiliar to many new contractors.

As a result, hiring an accountant or formation agent to handle this task often makes sense, especially if there are no associated costs for new clients.

Make sure you have the required information to hand so that your accountant can incorporate your company.

Read our 10 company formation steps to get an idea of what information is required for successful incorporation.

Registering your new company with HMRC

Your accountant can act as your ‘agent’ with HMRC. Once you have authorised them to act on your behalf, they can deal with the relevant tax registrations for your company:

• Corporation Tax – which is payable on company profits.
• Value Added Tax (VAT) – registration is compulsory if your VAT-taxable turnover exceeds the £90,000 registration threshold, although you can register voluntarily below this.
• PAYE – if your company needs to operate PAYE, it must register as an employer and account for Income Tax and National Insurance where applicable.

Payroll

If you need to operate PAYE, your accountant will usually set up and run your company’s payroll. This will enable you to pay yourself and any employees a salary. Payroll information is reported to HMRC through RTI, with a Full Payment Submission normally made on or before payday.

Accounting software

Your accountant will typically offer you a choice of online accounting software – such as FreeAgent or Xero. These excellent systems have made life much easier for both accountants and their clients.

You can invoice clients directly, link up your bank account, run your payroll, submit VAT returns, and view your tax position instantly with the market-leading software providers.

We’ve used FreeAgent for over a decade and strongly recommend it. It seems to be the package of choice for many specialist accountants.

Find out if your accountant provides a user account for free (included in the monthly fee), or if the service is chargeable.

Business bank account

As a limited company is a separate legal entity from its owners, its finances need to be kept separate from your personal finances. You should therefore set up a separate business bank account.

Your accountant may recommend a provider or help you arrange an account, or you can set one up yourself. Find out more here

What core ongoing tasks do accountants undertake?

• Run your company’s payroll, where this is included in your package. You may be charged an extra fee if you have further employees.
• Submission of payroll data to HMRC.
• Deal with Companies House correspondence, including completing your company’s Confirmation Statement. In a minority of cases, you may be charged the £50 fee separately.
• Deal with HMRC-related correspondence where they are authorised to act for you, such as changes to your personal tax code or tax-related queries.
• Completion of your company’s VAT returns (usually quarterly).
• Completion of your company’s annual statutory accounts for Companies House and the accounts and information required with its Company Tax Return to HMRC.
• Completion of CT600 (annual Corporation Tax return).
• Tax planning advice (usually included, though the depth of specific tax advice varies).
• Answering any day-to-day questions you may have relating to your tax affairs.

Some of our partner accountants

Additional services offered by accountants

Most accountants offer a variety of bolt-on services in addition to the core tasks listed above—some are ‘free’, and others may cost extra.

• IR35 contract reviews (providing an opinion on the IR35 status of your contract, or providing access to a third party professional IR35 contract review service).
• Bookkeeping – with most firms now offering some type of online accounting (either bespoke or a commercial system), entering details of your everyday transactions may be charged as an optional extra if you do not do this yourself.
• Completion of your personal tax return. Some firms include this in their monthly package, while others charge separately. As this is a personal service, the cost cannot normally be claimed against your company’s Corporation Tax bill.
• Provision of a registered office address for your company. This means that all official paperwork (from Companies House and HMRC) goes straight to your accountant, rather than your home address.
• Providing a service address for directors and other company personnel, so that your residential address doesn’t appear on the public record.
• Provide accountancy references for letting agencies/mortgage lenders (sometimes chargeable).
• In most cases, you will be assigned a dedicated accountant and a single point of contact. However, where several fee packages are available, this may not always be the case, so check first before signing up.
• Financial services, including mortgage/pension advice. Some firms, especially larger ones, have their own in-house IFA firms, whereas others can refer you to partner firms.