I'm an accountant, do I need to hire one?

[doubleh]

Just want to say this is my first post, so apologies in advance for any noobish mistakes or offence caused; I have been reading the forum for a while whilst deciding whether or not to take the plunge as a contractor, and have searched for any previous answers to my question without finding any.

I also realise I'm not quite a full on IT consultant, but you guys seem to have very good coverage on general contracting questions. I have however spent the last 5 years working in an investment bank on finance systems development, and am about to start my first contract after taking the last year off to travel and pursue other opportunities.

I will be working through my own company which I have already incorporated, and as a chartered accountant - strange as it seems - actually kind of enjoy the basic "running the business" stuff as a break from the day job, and am planning to do it myself. I have already been involved with a software development business where I set up proper records keeping using a cloud accounting package (xero) so plan to use this. I'm pretty comfortable in terms of figuring out the reporting and filing requirements and keeping on top of these, but recognise that I am no tax expert and so would engage one to help ensure I'm not paying too much - or doing anything that would put me at risk.

My question then is, as a contractor should I employ an accountant anyway? The reasons I can think of why I may want to do this would include, but not be limited to:

1. If there is a real benefit in terms of demonstrating that I'm genuinely in business and therefore outside of IR35

2. If it would be cheaper to employ someone anyway. I've seen online firms that would provide full service accounting, including a Xero subscription, for about £60 per month more than it would cost me to get Xero on its own. If it is likely to cost me more than this to get tax advice I may be better going with the package

What do you think? Are there other reasons I haven't thought of that would push me towards retaining an accountant?

Many thanks all

[NotAllThere]

It's the same decision as whether I maintain my IT equipment myself, or have someone else do it. If I do it myself, that's time I could be earning fees.

No real bearing on IR35.

[Clare@InTouch]

Agreed re the IR35 point - having an accountant doesn't have any bearing. It might be useful if they can review your contracts though, so keep that in mind when you're comparing monthly charges (£60 not inc IR35 reviews may work out more expensive than £100 including them).

Other than that it could just be a useful sanity check to ensure you're claiming all you can, and that there's nothing you're missing out on due to changes in legislation. Plus, it's time you could spend doing more interesting things!

[Bexter]

hi there, I'm an accountant at an IB too, working on finance systems change. My advice to you would be, get an accountant!

I like to keep on top of my books, I do calculate everything myself, but then I use my accountant as a check to ensure I've got it right.

Don't get me wrong, I find my accountant can be a bit annoying, he tells me stuff that is basic and that I know and we tend to have a bit of back and forth over things, such as whether its the invoice date or payment date that matters for profit calcs, and what type of expenses should be ok etc.

However I think the most useful thing, is that he is just familiar with which forms need filling in, by when, and how they need to be filled in - I just don't know that stuff!

So given that is only £75-100 a month, and its deductable, just do it, for peace of mind if nothing else, cause we all make mistakes and its good to have two sets of eyes running over things.

[kingcook]

I got an accountant for my 1st year's trading. Well worth it. But that's because i didn't know anything about accountancy!!

Now i do the accounting myself (with the help of FreeAgent). Others on here will disagree, but i think that paying £75 to £100/mth just to have someone (basically) process 1 invoice and print off payslips and dividend vouchers is a bit steep -- let the flaming begin!

Of course your accountant is there to ask advice when you need it, but not much changes month to month, at least for me.

I know what the best salary is to pay, the best dividend (if i want to stay out of the higher tax bracket), and how to do VAT and PAYE returns, and year end reports.

It works for me, others have different opinions, that's fine with me.

[JamJarST]

I'm an accountant too, albeit a very rusty one having been more involved in IT for the last 11 years and I pay for an accountant too. I picked one of the more expensive ones too, but their advice and service has been top notch, I trust their tax advise and think it has been money well spent. One day I might decide to do all my own accounts but for my first few years the piece of mind i get is what I need.

[doubleh]

Thanks all for the friendly welcome and good advice, which all makes sound sense.

I guess my takeaway is that there is an advantage in having a second pair of eyes which I definitely agree with; I'm also quite tempted by the idea of having a wingman for the first year and then going solo after that if all is well.

Does anyone have experience of consulting a tax specialist on a standalone basis - ie "I've got all my records and prepared draft accounts, can you review them and tell me anything I can't clam/should be claiming that I haven't/smart way of being tax efficient I haven't thought of"? In particular how is this likely to compare cost wise against paying an accountant every month?

I have no problem with paying the going rate for sound advice, I'm just not keen to pay someone every month to do things like raise a couple of invoices which I know I can do myself in 5 mins on my iphone while I'm on the train.

Cheers

[SueEllen]

I have no problem with paying the going rate for sound advice, I'm just not keen to pay someone every month to do things like raise a couple of invoices which I know I can do myself in 5 mins on my iphone while I'm on the train.

Cheers

With accounts, particularly the ones from the firms on here, if you are proactive and ask questions to clarify things for your particular situation then you will get answers.

If you are the sort not to bother investigating then asking whether x or y is tax deductable then you won't aren't likely to get anything from them accept standard advice in the form of a news letter.

The monthly fee is just what they charge you yearly if they were to do your annual accountants and pay roll in one go. It's just broken down monthly for ease of payment.

[TimCaprica]

I've been through relearning it all

Hiya,

I'm an accountant too. I previously worked in a specialist area (corporate finance) but decided last year to start an online practice for small businesses and contractors (Caprica Online Accountants, btw) using Xero and similar for about £60 per month more than the Xero license incidentally.

So cheap plug aside I've been through the process of relearning a whole load of tax stuff and then how to apply it in real life. You should be able to relearn the basic stuff in about 10 hours (ie what's tax deductible, what applies to you and the like). Learning how to register everything with HMRC and doing so is probably another 10 hours and then submitting tax returns another 10 hours on top of that. In all you are probably looking at the best part of a week to get the basic stuff right. All doing the first time obviously.

Going deeper than that though into the more complicated stuff is very much an ongoing process so only worth it if you actually want to learn this stuff. I expect you will earn more doing your specialist job than it would cost to pay someone.

So IMO if you enjoyed tax during your training then do it yourself otherwise go with the theory of comparative advantage and have someone else do it.

Tim

[doubleh]

Thanks Tim, what you say about the three levels of complexity makes complete sense.

I'd say I'm probably about 2/3 of the way through the basics, as I have been acting as FD for a software company for the last 6 months with very tight budgets so have been trying to do as much myself as possible. I definitely think the time vs benefit curve levels off beyond the basics and so would absolutely intend to have an expert to advise me on the finer details.

Cheap plug accepted, are you able to give a rough idea what you (or someone else in a similar position) would charge to do a tax review and offer value added advice given a set of draft accounts in Xero?

Cheers