When Should I Hire An Accountant?

Dealing with accounts is arguably the most tedious part of running a business. Could hiring an accountant save you time, money and grey hairs? The Business Moment talks to Rachael Dudley, a partner with local Chartered Accountants Bulley Davey, to find out

What can accountancy firms do for sole traders or small-to-medium businesses?

A firm of accountants can offer accounts, tax and business advisory services to a wide range of businesses and individuals, whether their turnover be relatively low or run into millions of pounds per year. The advice and support should be very much tailored to the business’ requirement which can change over time as the business develops.

Aside from the annual tax bill, what else can accountants help these businesses with?

Accountants can help sole traders fulfil their statutory obligations with HMRC whilst providing invaluable advice as to the best way to structure their business and keep up with changes in legislation. Many sole traders are often in need of management advice which can be overlooked if the focus is purely on the annual tax bill.

When does it become vital for sole traders or small businesses to hire an accountant?

An accountant should be hired when any individual or business intends to generate income which would not be taxed at source. If HMRC are not notified within three months of the start of a new business there can be penalties levied. There is no minimum level of income and individuals with property income, or other investment incomes, may also wish to hire an accountant to help with their tax affairs.

When should someone become VAT registered?

If your annual turnover is expected to be above £77,000 from 1 April 2012, you should consider becoming VAT registered. The registration limit increases slightly each financial year so the position should always be kept under review. An accountant can deal with the VAT registration for you.

One advantage of becoming VAT registered is the recovery of input VAT on costs within your business, but you obviously need to charge VAT to your customers as well. There are also schemes which can help small businesses such as the Flat Rate VAT Scheme. This scheme applies to businesses with turnover below £150,000 per year. A disadvantage can be the additional administration of filing VAT returns with HMRC on a monthly, quarterly, or annual basis, which is now dealt with online – a simple process once your business is set up. The Flat Rate Scheme can ease the administration for you, if there is also a financial benefit to using the scheme, which your accountant could assess for you.

What other issues need to be considered?

As a business there are many statutory obligations to fulfil. Your accountant can advise and help you through these during the course of the year and remind you when filing deadlines and tax payments are due. A major consideration is always whether you are trading through the right vehicle, should you be a sole trader, partnership or perhaps a limited company? This always needs to be assessed on a case by case basis, but there can be limitation of risk and tax savings under a limited company structure.

How would someone choose an accountant that is right for them?

When choosing an accountant you should always take the time to meet with them, which most firms should do free of charge initially, to discuss your requirements and whether they can be adequately met. As with all things in life the service and quality of work undertaken will vary depending on what you are prepared to pay, but there should always be value for money in seeking sound advice from experienced firms. Most firms of accountants are General Practitioners and within some medium sized firms they may have specialisms in certain areas of taxation or particular sectors to support more unusual or complex cases.

Accountants are generally governed by the ACCA (Association of Chartered Certified Accountants) or ICAEW (The Institute of Chartered Accountants in England and Wales) and will abide by their rules and ethics. This offers you protection as to what best practice should be operated and ensures that the principals of the firms are well qualified to deal with your affairs.

Recommendations are always helpful, but bear in mind that every business is different so it is sometimes difficult to make direct comparisons on costs of accountants and the work which is required for your case.

How do you know if you have a good accountant?

A good accountant should proactively ensure that you meet your statutory obligations and pay the least amount of tax within UK legislation. HMRC have the right to enquire into an individual or business accounts and hiring a good accountant should help ensure that your accounts and tax returns are accurate. If any queries are raised a good accountant should be able to deal with these for you.

What should it typically cost for a good accountancy service?

Every case is different, and the work required for your business is individual to you. A good accountant would always be prepared to provide a quote, which can be broken down per service. A letter of engagement should be issued so both parties understand what their responsibilities are.

Does it reduce the costs if a client presents their accounts neatly?

Costs can be kept down if you are prepared to keep your books and records well during the course of the year. It may also be that recommendations are made to you as to how you could improve your records to reduce costs in the future. Computer packages like Sage can work very well for small and medium businesses but the quality of information available to you and your accountant will only ever be as good as the accuruacy of the information entered.

Does paying a good accountant essentially pay for itself?

It certainly should do, whether this is in monetary terms of a tax saving, or peace of mind that HMRC is less likely to enquire into your affairs, or that if they do there should not be a problem. It is always good for small businesses to understand their accounts and to keep costs down an accountant can let you know what you can do to help. With accounts and tax returns being as complex as they can be there may be reliefs that you are not aware of if you try to do things yourself.

What are the pitfalls of doing it yourself?

Well it comes down to what you don’t know, which could mean you end up paying too much tax. HMRC are keen to see that individuals are taking due care and attention when preparing their tax returns, another possible risk of not hiring an accountant is unwittingly leaving loose ends that could be questioned.

Does hiring an accountant mean the accountant has a legal responsibility?

The letter of engagement outlines the responsibility of you as the individual or business owner, and the accountant. You have the legal responsibility for the information you have provided to your accountant and approve all documents submitted to the authorities. Your accountant should help you deal with any enquires raised by HMRC and some firms offer free protection insurance to mitigate these potential costs in the time it takes to resolve the problem with HMRC. If your accountant made a mistake when acting for you, they would take responsibility for that and be guided by the rules and ethics of their governing body.

Are there any other points people should think about when hiring an accountant?

The skill and experience of your accountant can not be underestimated, it can sometimes be dangerous to think you know it all, but most importantly you should get on with the advisors that you choose to work with. Always meet with them first and go through any queries or concerns you may have. N

Bulley Davey Chartered Accountants offers a wide range of accounts, taxation and business advisory and support services to businesses and individuals, with a number of dedicated specialist departments dealing with matters such as insolvency, business recovery, corporate finance and forensic accountancy.

Peterborough Office

4 Cyrus Way
Cygnet Park
Hampton
Peterborough
PE7 8HP

01733 569494

www.bulleydavey.co.uk