Do I need an accountant for my limited company?

There is no legal obligation to hire an accountant if you’re setting up a limited company. However, there are some very good reasons to do so.

No legal obligation to hire an accountant

In the vast majority of cases, if your new company is defined a micro-entity (‘small’), then there is no requirement to have your accounts professionally audited.

If you have set up a new company, you can prepare and submit its accounts yourself.

But, do you have the knowledge, patience and time to do this?

Before we address the compelling reasons why you should consider hiring one, let’s look at what an accountant does in practice.

What does an accountant do for a limited company?

We have covered the typical roles and responsibilities of an accountant here.

In essence, you can break down the tasks into three sections:

• Start-up tasks – setting up your company, advising you on the best share structure to use. Registering the company for VAT, Corporation Tax. Setting up your payroll, etc.
• Ongoing tasks – looking after your monthly and yearly accounts needs. Running your payroll, submitting VAT returns, bookkeeping (sometimes optional), creating annual accounts. Dealing with HMRC and other government bodies.
• Additional tasks – add-ons such as providing specific tax advice, IR35 reviews, providing references, etc.

As you will see, there are a lot of things to do when it comes to looking after a company’s accounts.

Example Monthly Fees

Could you manage your own company’s accounts?

The omnipresence of seriously good online accounting software, such as FreeAgent, has been a gamechanger for both accountants and their clients.

It has never been easier for both parties to fulful their end of the bargain: clients can invoice directly via the accounting software, and reconcile transactions directly with their bank accounts.

Accountants can easily see the state of affairs, and advise clients accordingly if weekly/monthly tasks haven’t been completed.

So, if you are considering doing your own accounts, this type of software is a massive help.

But, in reality, there are some strong reasons why using an accountant makes more sense.

Here we look at 7 reasons why you should appoint an accountant as a contractor.

1. Your time is valuable

Do you have the time to do your accounts, as well as building your contracting business? As a client, you need to devote an hour or so a month to keeping your accounts up-to-date. If you have to look after your accounts too – you should a fair few additional hours to this tally. For an accountant, keeping on top of a company’s monthly and annual tasks is simple. For non-accountants, this may not be the case.

2. Accountancy costs are not high

Given the benefits they provide, contractor specialist accountants are inexpensive. As you’ll see from our popular comparison table, you can choose a comprehensive service for a mere £80-100 per month.

3. Specialist knowledge

Accountants who specialise in the contracting industry will be up-to-date with the very latest changes – particularly IR35 and Off Payroll. If you want to do your own accounts, are you willing and able to digest and comply with complicated and ambiguous tax rules too?

4. Tax-saving advice

From advising you on the best share structure for your company upon formation, to providing tax-planning advice, a shrewd accountant could save you money.

5. Dealing with HMRC

From our own experience, dealing with HMRC on relatively trivial matters can be a nailbiting affair. Accountants are familiar with how HMRC operates, and the best way to solve problems – particular if you are faced with an investigation into your company’s affairs. Do you want to deal with this on your own?

6. References

If you need a reference for a mortgage application or rental, an accountant is the perfect person to ask. For contractor specialists, this is something they do every day for their clients.

7. Seamless help when starting up

Most contractors who are new to the industry have not previously been company directors. A seasoned accountant will guide you through the entire formations process.

This includes everything from choosing a company name, to providing a registered address, should you need one.

The accountant will also set your company up with HMRC, and guide your through other steps in the startup process, such as setting up a bank account.

All of these tasks will often be included for no extra charge, should you become a client.

Wrapping up

You are a professional contractor. Your job is to provide highly skilled technical advice to end-clients.

There is some overlap in the typical skillsets of accountants and contractors. There is no doubt that many contractors are perfectly able to do their own company accounts.

But, do you have the time, expertise, and patience to take this on?

Or would you rather pay a Corporation Tax-deductible £100 per month for a specialist to do this for you?