Contractor Tax General Acounting Mistakes
As a limited company contractor, the professional person you are most likely to seek advice from is your accountant. In this article, we look at five key things you don’t want your accountant to do.
Many long-term contractors will have used several accountancy firms before settling on their current one. Although personal preference plays a part when choosing an accountant, there are some things all contractors will hope they won’t encounter with their provider.
General accounting mistakes
It goes without saying that, of all people, you need your accountant to be accurate and organised. Some contractors will have used accountants in the past who have made basic errors when compiling accounts, running their company payroll, and calculating tax liabilities.
Although the nature of accounting means that the occasional error may arise, a conscientious accountant will rapidly make good any mistakes.
Missing deadlines
As a company director, you are ultimately responsible if information is not submitted to Companies House within the prescribed deadlines.
Failure to submit company documents such as your annual accounts and annual return (Form 363) can result in significant financial penalties.
You need to be confident that your accountant is aware of these deadlines, and is not a ‘late filer’, otherwise you will be penalised.
The same timeliness is essential when it comes to settling your tax liabilities (VAT, PAYE, NICs, etc.)
Lack of contact
Some accountants seem to be permanently engaged. Phone messages are not returned regularly, and the staff to client ratio may seem inadequate.
For many contractors, customer service will be as important a factor in choosing an accountant as price. Some firms even offer service guarantees, which may prove attractive to many.
Unfortunately, it is often hard to judge how you well an accountancy firm communicates with clients before you sign up. For this reason, you can’t underestimate the power of personal recommendations from other contractors when selecting an accountant.
Not proactively offering tax advice
Many accountants provide a monthly service which will include everything from compiling your accounts, to running your payroll and calculating your VAT liabilities. However, you may find that they do not offer any detailed tax saving or investment advice.
Typically, you need to pay a higher monthly fee for more specialist advice, but you will often receive a better all round service if you a prepared to pay a bit more each month rather than signing up with the cheapest accountancy provider.
Lack of familiarity with contractors
This is a key factor when choosing an accountant. We recommend that contractors use specialist accountants.
Not only will they be very aware of the duties required to run your accounts in an efficient way, they should also be aware of industry-specific tax issues, such as the currently-shelved ‘income shifting‘ proposals, IR35, and manged service company legislation.
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Income tax, capital gains tax, and inheritance tax
