Given that all qualified accountants should be able to keep the books of your average limited company contractor, why do most contractors hire specialist accountancy firms?
Here are some of the key reasons why you should consider using a contractor specialist to look after your limited company accounts:
Although all accountants have access to the latest tax legislation information, only specialists will tend to understand tax rules which are targeted at contractors and freelancers. Some of the most important include IR35, the Managed Service Company (MSC) rules, and the Agency Workers Regulations (AWR).
Of these areas, IR35 is the most important. Whether or not your contract work falls within its scope will make a significant difference to your take home pay.
A specialist accountant will be aware of what clients have to do in order to comply with IR35; you need to undertake contract reviews, make changes to working practices in some cases, and consider IR35 insurance as an inexpensive safeguard against an HMRC investigation.
A specialist accountant will be fully aware of how a contractor’s accounts will typically be run, what type of transactions are usually made (weekly or monthly invoices), and which expenses are likely to be reimbursed.
In addition, they will advice their clients on which VAT scheme to register for (the Flat Rate VAT scheme can save thousands each year for some contractor companies).
Tax planning is also likely to follow a similar pattern for most contractor clients – in terms of the split between salary vs. dividends, and they will also advise on the best way to structure the capital of a limited company in a tax efficient way.
Contractor accountants are also well aware of the nature of the contracting lifestyle – with gaps between contracts being commonplace.
The specialist contracting accountancy marketplace is very competitive. Although contractors often complain about the fees they pay each month, the price of a contractor accountant has not risen with inflation over the past decade.
Some of the best known providers charge £80 or so per month – which was considered a fairly normal rate in 2001. Naturally, fees do vary considerably between firms; you can pay as little as £65 to over £150 for a comprehensive monthly accounts service, although price is just one factor you should consider when choosing an accountant to handle your company’s affairs.
Once again, due to the competitive nature of the industry (and also the technical expectations of its constituent members!), most leading accountants now offer heavy duty online accounting systems for contractor clients.
A good online system can save a great deal of time for both clients and accountants. Rather than tucking away your paperwork into an envelope each month, contractors can not scan and upload all their expense claims, invoices, and other paperwork directly via the web.
It is highly unlikely that you will find a more technologically advanced set of accountancy firms in any other industry.