How much will a new accountant charge to bring your old accounts up-to-date?

Over your entire career as a limited company contractor, you are likely to change accountants at some stage.

In practice, the biggest concern is often not the switch itself, but the cost of bringing your accounts up to date.

From our experience, decisions to move accountants are frequently driven by poor service, particularly poor communication.

Overcharging, often in the form of a sudden, unjustified price rise, also rarely sits well with contractors.

Why catch-up fees exist

When you move to a new accountant, they inherit responsibility for your compliance going forward. That means they must first understand, review, and often correct the state of your existing records.

If your previous accountant has not completed your annual accounts, reconciled your bookkeeping, or dealt with outstanding submissions, this work does not disappear when you switch.

Completing that backlog is commonly called catch-up work, and it is the main reason new accountants charge an initial fee.

How much will a new accountant charge for catch-up work?

Many small business accountants charge over £500 simply to complete a set of limited company annual accounts. It is the most time-consuming part of the accounting cycle.

In a normal arrangement, that cost is spread across the year within a monthly fee.

When you arrive partway through a year or with incomplete prior-year accounts, that work still needs to be done, but there is no past monthly fee to offset it.

As a result, accountants often need to charge an upfront fee to cover any outstanding accounting work.

It is unreasonable to expect a new accountant to absorb a large volume of historical work without charging for the time required.

In our experience, accountants tend to price catch-up work in one of three ways:

• A fixed one-off fee to complete the previous company year’s accounts and bring the current year up to date
• An hourly rate based on the time required, often linked to the seniority of the staff involved
• No explicit catch-up fee, usually where the firm absorbs the cost as part of a competitive offer to win your business

So-called no catch-up fee offers are not uncommon, but they usually rely on your records being broadly accurate and not too far behind.

When catch-up fees are likely to be higher

Catch-up costs are rarely arbitrary. They tend to increase where:

• Annual accounts for the previous year have not been completed.
• Bookkeeping has not been kept up to date.
• Bank accounts are unreconciled or have missing data.
• VAT returns or Corporation Tax submissions are outstanding.
• Records are incomplete or inconsistent.

This situation often arises when contractors decide to leave an accountant due to poor service or lack of communication.

You may want to move before your previous year’s accounts are finalised, even though it is often said that the best time to switch is after accounts have been submitted.

In reality, if you have lost confidence in your accountant, continuing to rely on them to finish critical compliance work is not always sensible.

What actually happens when you change accountants?

When you appoint a new accountant, they must contact your old accountant to request information and arrange a handover. This process is known as professional clearance.

Most contractor accountants now use software such as FreeAgent or Xero, which means bookkeeping data can usually be transferred securely and efficiently.

Supporting records, including partially prepared accounts and working papers, should also be passed across.

You will also need to authorise your new accountant to act on your behalf with HMRC. This is mostly handled online, though delays in receiving authorisation codes remain common.

You can read more about the mechanics of switching in our guide to changing accountants.

Keeping catch-up costs to a minimum

If you are considering a move, it is worth asking potential accountants upfront how they deal with catch-up work.

Firms that specialise in contractors are generally familiar with mid-year transfers and can often give a clear estimate once they have reviewed your position.

Taking time to find a firm with a good reputation among other contractors is usually time well spent.

If you can also find a provider with minimal catch-up fees or a transparent fixed price for outstanding work, that often represents the best outcome.

Further reading

• Our list of recommended specialist accountants
• What to do if you want to move to a new accountant
• How to choose the best contractor accountant