Is your limited company accountant qualified?

For most limited company directors, 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. Separately, see our guide to ACSP registration and what it means for your accountant.

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 without holding a professional accountancy qualification. However, if you provide accountancy services by way of business, you must be supervised for anti-money laundering purposes, either by HMRC or an appropriate professional body.

However, the right to use a ‘chartered’ designation depends on meeting the membership and qualification requirements of the relevant professional body.

AAT qualification

Many accountants starting out in their careers will usually have AAT (Association of Accounting Technicians) qualifications. The main accounting qualifications are:

• AAT Level 2 Certificate in Accounting
• AAT Level 3 Diploma in Accounting
• AAT Level 4 Diploma in Professional 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 complete the relevant professional body’s qualification and practical experience requirements.

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. Members and regulated firms are also subject to the rules and monitoring requirements of their professional body.

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 and firms regulated by bodies such as ICAEW are also subject to professional indemnity insurance requirements.

Multi-skilled professional services

As well as helping you deal with the everyday accounting tasks familiar to all small company owners, chartered accountancy firms often offer a wide range of extra services, including specialist tax advice and, where they hold the necessary authorisations, services such as investment advice, probate, 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 faced a large number of tax and employment status changes 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 meet professional qualification and practical experience requirements, so they will usually have built up substantial real-life experience by the time they qualify.

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. For most small contractor companies, there is no general requirement for the annual accounts to be signed off by a chartered accountant, although some types of work and financial references may require appropriately qualified or authorised professionals.

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.