Setting up a limited company is a smart option for contractors. It allows you to make the most of your income with less taxation than the direct pay-as-you-earn (PAYE) route. The downside? It requires more admin work to set up and run the company.Whether it’s the initial incorporation, invoicing, bookkeeping, payroll or tax, it’s going to take up your time and could cause a lot of hassle along the way. Unless, however, you use a limited company accountant.
A good accountant can assist with, advise on and manage a wide range of administrative tasks for limited companies.
Not only that, but they could also improve the way your business is run and your bottom line too. Read on as we explore the value of a limited company accountant.
Setting up your company
Before you’ve even started operating as a limited company, you’re faced with a list of tasks to get things up and running. Establishing shareholder proportions, registering for PAYE with HMRC, VAT registration and transferring assets from the sole trader to a limited company are just some of the ways accountants can assist with the initial incorporation.
Running the company
Quarterly VAT returns, annual accounts and ongoing bookkeeping can easily bog you down when you have contract work to focus on.
Not just because of the administrative burden, but also the complexities. HMRC’s guide to employer expenses and benefits, for example, is a whopping 100 pages long.
That’s why, once you start operating as a limited company, you’ll begin to realise the real value-add of an accountant. With an accountant, you can forget about looming deadlines and changing regulations. Good accountants are familiar with all the latest rules, regulations and important deadlines, so they can keep your accounts in order with no problems.
Having this administrative burden taken off your plate removes the stress of running a limited company. It also frees up your time and makes time management much easier, with contract work as your sole focus. With this comes the potential to make more money, taking on extra work and getting jobs done quicker.
Getting things right – and avoiding penalties
It’s not just about time consumption either. While some contractors may be willing to take on the administrative burden, it’s another challenge to get it all correct and on time. Companies will be fined £100 if they are a day late, with an extra £10 per day for the following 90 days. That’s up to £1,000 for a late tax return, which increases further after 6 or 12 months.
There are also fines for errors on tax returns, as well as the added time of re-submitting your returns. Tax return errors can be penalised by between 0 and 30% of the tax you owe, or even more if you’re thought to have deliberately underestimated your tax.
This is made all the more complicated by the introduction of IR35. Being found inside IR35 by an HMRC investigation could result in hefty penalties, which could be backdated, resulting in a sum that’s completely unaffordable for you and your business. Specialist accountants can assist with contracts and advise on any problematic working practices to keep you outside IR35.
Improved returns & future success
Another way in which accountants can assist limited companies is by improving your returns. Firstly, they can reduce the amount of tax you pay. Accountants have an in-depth knowledge of expenses, benefits and VAT, so they can maximise the amount you claim back from HMRC. Their knowledge of dividends will also help when it comes to paying yourself through the company – and staying tax-compliant.
The right accountant can also make a big difference to the future success of your business. Why? Typically, you will be working with the same accountant from day one. They will get to know your business, your goals and your challenges. Combined with their experience in growing other businesses, they will be able to give you invaluable advice when it comes to taking the next steps and growing your company.
Finding the right accountant
To get the most out of your accountant, you want someone who specialises in assisting limited companies – ideally, someone who is familiar with IR35. With Pulse Accounting, that’s no problem at all. To speak to our in-house accountants and IR35 specialists about your current or previous contracts or if HMRC are querying your status, call us on 0161 300 9675 or email firstname.lastname@example.org.