Contractors' Questions: Can I do my company accounts myself?
Contractor’s Question: I’ve read the answer to whether contractors can do their limited company accounts themselves when inside IR35, but what about more generally-speaking? So putting IR35 aside, can I do my accounts myself? I’m pretty numerate but I am semi-new to contracting.
Expert’s Answer: It’s not the question you’re posing directly but ‘Do I need an accountant?’ is a query that plenty of limited company directors have asked us in the past year, throughout the pandemic and following IR35 reform in April.
Legally-speaking, you are under no obligation to engage a firm like ours to do your accounts, and you’re well within your rights to sort everything yourself.
Two key questions
But before taking on this responsibility yourself, you should ask yourself two key questions:
- Do you understand how to do this compliantly?
- Is your time best spent managing your accounts?
If it’s a resounding ‘yes’ to both, then go ahead!
However, for as many as millions of limited companies, the fact of the matter is that accountants provide an invaluable service. And you yourself might find that the return on investment and freedom it allows you to develop your business with the peace of mind that your tax is being kept on top of is worth every penny.
Rapid change, staggering cost
The tax landscape is also changing rapidly. Whether it’s IR35 reform, the furlough scheme or any number of Covid-19 support schemes, there is a lot that you’ll need to be aware of when running your limited company and its accounts.
All of this takes both time and a certain level of understanding to get it right and ensure compliance. Plus, the cost of non-compliance can be staggering. A good accountant – and preferably one that specialises in the contracting landscape – will be able to manage these complex issues on your behalf, in addition to ‘run of the mill’ company accounts management.
Your return on investment delivered by an accountant could be game-changing too. Let’s say you spend roughly £100 a month on a fixed price accountancy service. That’s £1,200 or so annually to ensure your tax compliance.
You running the business, or the business running you?
Sure, you might be able to keep on top of things yourself, but is that where your time is best spent? Would you make that money back in a few days on a contract? The last thing contractors need and want is to be bogged down, stressed and consumed by their own tax affairs. It’s not conducive to running a successful business.
If we weren’t so busy managing contractors’ accounts, we could reel off all the many other benefits of accountants – ranging from access to other wealth management and financial services, to helping you ensure tax compliance and tax efficiency.
Get tech to back you up, if you do go it alone
All that said, if you have your heart set on managing your business tax affairs personally, my advice would be to at least invest in accounting software. Technology will give you a rough overview of income, spend and estimate your tax liabilities.
That’s not to say it’ll be bang on the money all the time. While this software is certainly useful, its accuracy is only as good as the information you input – so you need to make sure that every expense is tracked, categorised, receipt or record--kept, income declared, and tax liabilities tallied.
Finally, ask around...
After all this, and bearing in mind the other services offered by fixed-fee accountants, you might find that you’re better off engaging a trusted expert to take care of everything on your behalf. If in doubt, talk it through with other contractors – most tend to see the value of contracting out their accounting but it’s worth double-checking with those who you know are running a business similar to yours. Good luck with your decision!
The expert was Troy Stevens, director of QAccounting.