If you set up a limited company, is appointing an accountant to look after your affairs a statutory requirement, or can you take care of your accounting duties yourself?
No legal requirement to appoint an accountant
Despite what you might expect, there is no legal requirement for small companies to use an accountant, and companies are entirely exempt from being audited if they meet the following criteria:
1. The company must be ‘small’ – turnover of less than £6.5m, and less than 50 employees, and a balance sheet turnover of less than £3.26m.
2. If any of the company’s members demand an audit (assuming they hold 10% of the share capital, or 10% of all members for a company limited by guarantee).
Clearly, almost all Company Bug readers will run ‘small’ companies as per this definition.
Why would you choose to use an accountant?
Although not mandatory, there are many reasons why the vast majority of limited company owners do use accountants, rather than taking care of their own accounts.
Put simply, an accountant does not simply compile your accounts at year end, and submit your VAT returns. They undertake a multitude of other duties, including:
- Registering the company with all the relevant tax departments – VAT, Corporation Tax, PAYE, etc.
- Setting up and running the company payroll.
- Book keeping.
- Completing company payroll forms, e.g. P11D, P35 &P14.
- Dealing with company-related correspondence (Companies House, HMRC).
- Providing tax planning advice.
- Dividend administration advice.
- Providing professional references.
In addition, professional accountants understand the nuances of dealing with the tax authorities, the correct format to submit information to HMRC, and are generally for more able to deal with tax enquiries should they arise.
If you need advice on anything from the expenses you can offset against Corporation Tax, or whether or not you have enough retained profit to declare a dividend legally, an accountant would be able to answer these queries with ease.
Should you decide to go it alone, you must ensure that you maintain your accounts according to Generally Accepted Accountancy Practice, submit information in a timely and accurate manner (and in the right format), and ensure you meet the company’s statutory and financial obligations.
You should also work out how much time you are likely to have to spend preparing your accounts, book keeping, and dealing with HMRC, then compare this cost to that of a typical contractor or small business accountant.
If your main consideration is to save money, you may well find that your accountant can save you both time and money – and you will be able to concentrate on running your own business without worrying about the numbers.
- Authorising an accountant to act on behalf of your company
- How to choose a contractor accountant
- The typical duties and responsibilities of an accountant
- Where can you find contractor accountant reviews?
- How much does a contractor accountant cost?
- ClearSky Accounting - specialist support for contractors
- Visit Hiscox for Professional Indemnity and Business Liability Insurance
- Contractor Finance - up to £30,000, when you need it
- InTouch Contractor Accountants - Personal Online Accounting
- Join PCG - Free impartial start-up advice for contractors.
- Visit Qdos Consulting for tax investigation cover and IR35 insurance.
- 90% Pay Retention for Contractors - Helix Management Ltd