If you’re a company director, it’s very rare that your favourite task will be the overseeing of company accounts and tax returns.
Company owners have much better things to do with their time, like watching their business flourish and staying on top of winning new projects, managing staff and producing great work.
Time spent managing the company accounts is therefore time wasted that could go toward enhancing the growth of the business.
At this stage, if you’re now starting to wonder: Do I need an accountant for my Limited Company, the answer is most probably yes.
Using the services of an accountant can give you back that time and make accounting duties substantially less painful.
If you’re not yet persuaded, read on as we outline some more of the main reasons why limited company directors should consider using the services of an accountant.
Is it a legal requirement to appoint an accountant?
Before we list the benefits of using an accountant for your business, it’s best to talk about legalities.
Currently there is no legal requirement that states that Limited Companies must use an accountant.
A limited company is also entirely exempt from being audited if it meets the following criteria:
- The business is classed as ‘small’. In the eyes of HMRC, a business will only be classed as small if it has an annual turnover of under £6.5m, employs less than 50 people, and has a balance sheet turnover of under £3.26m.
- Company members can demand an audit, but this will be overturned if they do not hold 10% of the share capital or 10% of all members if the company is limited by guarantee.
Read more about what triggers HMRC Audits here.
Despite this, limited companies should still consider using accountants. A good accountant can provide business advice, help with business decisions, and take care of all elements of account filing.
Do small businesses need an accountant?
Just like above, although a small business may not necessarily be legally required to hire its own company accountant, small business owners should absolutely consider the help of an accountant.
When a business is first formed there are a multitude of things that accountants can provide advice for. Examples of this could be:
- Business Strategy
An accountant can help with a number of different strategic areas of business. For example, when considering buying a business an accountant can delve into the company accounting records to make sure that the information on the balance sheet is correct. On the other hand, accountants can even help with the sale of a business, and with forming a businesses structure.
- Helping with HMRC
When a small business is first formed, dealing with official government paperwork can be complex and confusing. HMRC for example has many rules and regulations that paperwork must be submitted in conjunction with, and it can be very easy at first to make mistakes. If a small business was to use an accountant, the complexity and potential fear of making mistakes is removed.
- Business Growth
Another thing accountants can help with that is often overlooked by companies is their ability to assist with company growth. If the company starts to grow at an exceeding rate and takes on more staff, clients and even locations, accountants can help with taxes such as corporation tax, insurances like indemnity insurance, and they can use accounting software to analyse cash flow, company accounts, and even pricing. That can make a world of difference to busy directors.
It’s not only small businesses that accountants can benefit in big ways. Businesses of all sizes can reap the benefits of working with an experienced accountant across a number of different areas.
How can an accountant help my business?
Here are just some of the main ways an accountant can help a limited company of any size.
Registration with Companies House
In the early days of your business, Companies House and the legalities surrounding it can sound daunting.
An accountant can change this. They can help you with registering your company with Companies House, which lessens some of the accounting paperwork you’ll encounter in the first stages of your new business.
A company accountant can also register your company for VAT, your Corporation Tax Return, and payroll responsibilities if you will be an employer. They’ll also be able to provide advice about which tax liability your company may fall into.
In larger companies, payroll can be managed in house with the use of accounting software, but in small businesses, it’s often outsourced to an accountant.
Accountants can take care of the filing required that comes with the business paying out money, and they can also ensure the accounts are balanced correctly once employees have been paid. Outsourcing payroll to an accountant can also save you money through not needing to pay for expensive software and the training that comes alongside it.
VAT, or value added tax, has a reputation for being confusing and a nightmare for new business owners.
However an accountant can help a company navigate their VAT returns, and identify the correct payment scheme so that the business is still balancing its cash flow. Accountants can also file the necessary quarterly VAT returns, keeping the business safe from any unexpected fines.
Just like submitting your annual accounts and quarterly VAT returns, a limited company will receive a notice from HMRC at the end of each financial year – or the company’s accounting reference date – to submit a company tax return.
The purpose of the return is to display your taxable profit, even if the company has made a loss or is below the tax threshold.
Information required includes the profit and loss account, adjusted profits, and the gross profit less expenses and investments. At first glance the paperwork looks confusing, but an accountant can efficiently prepare and calculate how much Corporation Tax the limited company owes, as well as when their payment is due.
Bookkeeping is a time-consuming process but a necessary task for a limited company. If records are not kept of invoices and receipts, the hunt for missing paperwork at the end of the financial year is exacerbated and could lead to fines.
For accountants, bookkeeping is part of their daily routine and they can take care of record keeping and creating a tidy papertrail, removing the stress of the end of the financial year.
Limited companies must file their annual accounts with HMRC and Companies House at the close of each financial year. If a company does not submit their annual accounts, they could face fines or even being struck off of the register.
Accountants prevent this from happening. They produce and prepare the required paperwork to ensure that it’s submitted within the deadline. Information accountants will produce within the accounts includes balance sheets, profit and loss accounts, a report from the company director, as well as any notes.
Peace of Mind
Perhaps one of the most important, but overlooked advantages of having an accountant is the peace of mind that they can bring to company directors.
Accountants remove the complexity and stress of muddling through financial accounts, producing paperwork, and instead save the business both time and money by efficiently and effectively managing all aspects of bookkeeping and filing.
Any director in any business can benefit from using accountants. Even self employed company owners can use accountants to assist with their self assessment tax return.
Working alongside one means never worrying about late accounts, potential fines, or a hefty paper trail and we at iFinance Department certainly recommend all businesses to consider hiring the services of one.
At iFinance Department we’re a virtual accountancy firm. That means we seamlessly integrate with your business as an extra member that’s always by your side. Find out more about our services, or book an introductory call with us today to see how we can help make your finance fun.