In this article, we’ll look at some of the key things to consider when looking at whether to appoint an accountant for your limited company.
What is a Limited Company Accountant And Why Does My Business Need One?
In short, do I need an accountant? An accountant is an individual that has a good understanding of accounting and tax. They are able to prepare financial reports and tax returns from bookkeeping records. An accountant will be able to deal with all of the accounting and limited company tax compliance requirements. The requirements of each individual business will vary and an accountant will be able to identify which obligations are relevant to your business and ensure that they are met.
Is There a Legal Requirement To Appoint An Accountant for My Company?
There is currently no legal obligation for UK based organisations to employ accountants to deal with their businesses finances. So you could choose to complete all of your company’s accountancy and tax requirements yourself. However, unless you’ve got some accountancy and tax experience and your business model is fairly simple, it isn’t something we’d normally recommend. Perhaps a good example to demonstrate this is that it’s quite common for Chartered Accountants that don’t run their own firm of accountants but perhaps have a limited company to provide consulting services, will often choose to engage the services of a firm of Chartered Accountants who are dealing with accounting and tax compliance issues for SMEs every day. It’s therefore clear that they recognise the complexities of this work and the time that it would take them to complete it themselves
When Is The Best Time To Hire Accountants?
We would always recommend hiring an accountants as soon as you’re ready to start your limited company. The reason for this is that there are many potential pitfalls. If you choose to wait for example until your annual accounts are due for filing to look to appoint a financial advisor and you haven’t dealt with any other compliance issues with Companies House, it’s likely that your company will already be in strike-off proceedings (i.e. Companies House have started action to remove your company from the Companies House Register, at which point any company bank accounts will be frozen).
By hiring an accountant early, you’re able to get the advice that your business needs to be a success from the start. Even if you are only at the stage of incorporating the company, it’s worthwhile getting an accountant involved in this process. They will be able to ensure you avoid making any mistakes through the process and also advise you on the optimal share structure for your business. They’ll also be able to get your business registered for any applicable taxes which as a minimum will be corporation tax but you may also need to register your company for VAT, PAYE, or international VAT/GST. An accountant will be able to get your company registered for all of these taxes.
Another significant consideration when delaying appointing an accountant is that if you’re not able to deal with the accounting requirements in the meantime, the accountant you appoint will then need to catch up on the work and charge you separately for this. So whilst many accountants do charge a fixed monthly fee, catch-up work will usually fall outside of this monthly fee and be charged separately. So whilst you perhaps get some benefit from getting to pay for the work later, you won’t actually save yourself any money but you will miss out on getting the advice your business needs when it needs it.
What Are The Main Benefits Of Appointing An Accountant for Limited Companies?
There are many benefits to appointing an accountant for your limited company. Some of the main benefits are:
Compliance – there are many deadlines that a limited company typically needs to meet. As a minimum, there will be a Companies House deadline for filing the annual accounts, another Companies House deadline for filing the confirmation statement, a deadline for paying Corporation Tax to HMRC, and finally a deadline for filing the Corporation Tax return with HMRC. However, in reality, most limited companies will have many more deadlines for other taxes such as PAYE (filing deadlines will be in line with the payroll frequency and payment deadlines will be quarterly or monthly depending on the size of the payroll) and VAT (usually quarterly). Appointing an accountant for your limited company means that the accountant can manage all of these deadlines on your behalf. They will remind you when the deadlines are approaching and request the information that they need from you in order to file the necessary information. Most of these deadlines are also accompanied by fines, which can often be significant (e.g. it’s possible for a private limited company to be fined as much as £3,000 for late filing accounts).- Tax efficiency – without appointing a financial advisor for your limited company, it’s easy to make mistakes that will result in you paying more tax. Common issues on corporation tax returns include not being aware of all the expenditures for which you can claim tax deductions or neglecting to claim capital allowances on the purchase of fixed assets. It’s often common to see that companies have failed to register for VAT at the correct time and are faced with a back-dated VAT liability. This can often be a costly mistake, particularly for businesses with lower gross profit margins that can less easily absorb the impact of VAT registration. An accountant will also be able to advise the business owners on their own personal tax efficiency, ensuring that they remunerate themselves from the business in an optimal way for their situation.
- Informing your decision-making – an accountant will usually give you the option to have your bookkeeping records maintained in a cloud accounting package. If you’re bookkeeping is updated regularly, it then means that you can jump into your accounting software at any time and get a good picture of how your business is doing. This can be really useful in informing your decision-making. Many accountants will also offer frequent management reports which will offer you further insight into the financial performance of your business. It might be that you don’t need reports like this from day one but as your business grows, they’re likely to be of more benefit and a good accountant will regularly review the service that they are offering your company to ensure it’s still meeting your needs.
- Finance – an accountant will be able to identify when your business may need additional finance and advise you on the different options available to your business.
- Time – an accountant has the potential to save you a lot of time. As your business grows, if you’re trying to deal with all the bookkeeping, accounting, and tax requirements, it can easily turn into a full-time job, even for a relatively small business.
Compliance – there are many deadlines that a limited company typically needs to meet. As a minimum, there will be a Companies House deadline for filing the annual accounts, another Companies House deadline for filing the confirmation statement, a deadline for paying Corporation Tax to HMRC, and finally a deadline for filing the Corporation Tax return with HMRC. However, in reality, most limited companies will have many more deadlines for other taxes such as PAYE (filing deadlines will be in line with the payroll frequency and payment deadlines will be quarterly or monthly depending on the size of the payroll) and VAT (usually quarterly). Appointing an accountant for your limited company means that the accountant can manage all of these deadlines on your behalf. They will remind you when the deadlines are approaching and request the information that they need from you in order to file the necessary information. Most of these deadlines are also accompanied by fines, which can often be significant (e.g. it’s possible for a private limited company to be fined as much as £3,000 for late filing accounts).In Summary
In summary, whilst it isn’t a requirement or always necessary to appoint an accountant for your limited company, there are usually many benefits to doing so and these benefits are likely to outweigh the costs involved. It’s also worthwhile appointing an accountant earlier on in your business journey in order to get the most benefit. If you’re looking for an accountant for your limited company, please get in touch with us at 01942 725419.