Appointing an accountant

On this page, we cover:

  • appointing a contractor limited company accountant
  • appointing an accountant as an agent with HMRC

Let’s address a myth of running a Limited Company from the start. You don’t actually need an accountant.

So why does almost everyone choose to have an accountant? Accountants help you stay compliant with HMRC, understand your business cash flow, profitability and how much you can withdraw, file accounts, process your payroll and complete yourself assessments.

As the director of a contractor limited company, you’re legally responsible for all those tasks, but by finding a good accountant you can in effect just sign on the dotted line and let the rest get taken care of without the hassle.

Appointing an accountant

There are hundreds of specialist limited company contractor accountants in the UK. A contractor should choose an accountant they feel comfortable with and not necessarily a firm from a top 10 contractor accountants list. When selecting an accountant, a contractor should ensure that:

They’re a contractor specialist– accounting for contractor limited companies is generally less labour intensive than for limited companies with more complex internal structures. However, most contractor specialist accountants are specifically set up to deal with high volumes of business offering a quick turnaround to clients.

Although some contractor limited companies still use a traditional accountancy practice, most now use specialist contractor accountants to deal with their financial and taxation affairs.

There’s contractor focused pricing – contractor specialists generally offer their services at much reduced rates compared to standard accountants because there’s not a huge array of variables involved in contractor accounting like stock.

At best, a specialist accountant will be able to reduce the tax a contractor and a contractor limited company pays by a few thousand pounds. Contractors should satisfy themselves that the fee for any accountant’s services does not take up too large a proportion of the savings on tax they promise for a client.

You get a service level agreement– a contractor should make a list of what it is that they want from an accountant and, when deciding on one, use that list for comparison purposes. Benchmarks to consider may include time taken to receive a response, whether there is a dedicated account manager, regular account reviews, and so on.

They have technological capability– a specialist accountant will be able to recommend an online contractor bookkeeping package from which the accountant will regularly download their clients’ latest financial records. This greatly streamlines the process and cuts down the amount of time needed by the accountant to compile and submit tax returns, resulting in a significant saving in professional fees to a contractor.

Appointing your accountant with HMRC as your “agent”

Most self-employed contractors and limited company directors do not deal directly with HMRC on many taxation issues. Instead, they appoint their accountant or “agent” as their nominated first points of contact. Anyone appointed as an agent must meet HMRC’s standards for agents. To appoint an agent, use form 64-8 or the online authorisation service.

If an agent is not appointed, then HMRC will send personal and corporate communications on tax to the managing director of a contractor limited company and they will only accept a reply from that director. If you want to get the most out of your accountant and reduce your workload then appointing them as your agent is a good idea.

It’s not just on a personal or corporation tax level that an agent can be appointed. If a contractor decides to register their limited company for VAT, its director can also appoint an agent specifically for VAT.

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