Do I need to hire an accountant or bookkeeper?
You will learn
- Different types of business structures
- The benefits of good bookkeeping
- The importance of registering with HMRC
You might think that your start up or small business isn’t big enough to hire an accountant or bookkeeper, or you may feel your affairs are so simple that you can do it yourself.
However, running a business is hard enough without having to learn all of the accounting/tax rules, regulations and laws that you need to comply with. Doing it alone can be time consuming and costly if mistakes are made.
There are good reasons for hiring an accountant at different stages of your business growth. From business plans to actual start up, annual accounts and tax returns, VAT registration, mortgage applications and budgets/forecasting, general financial advice and ceasing/selling your business.
In addition, your circumstances may change and it may be necessary to discuss your tax plans with an accountant if, for example, you separate from your spouse, you retire, you buy property, etc.
Choosing a business structure – Sole trader/ Partnership/Limited Company
Speaking with an accountant can further explain the following business structures and help you choose the one that best suits you. Which structure you choose will define your responsibilities with respect to the paperwork to be filled in, the taxes you will have to manage and pay and how you can personally take the profit generated from your business.
Sole trader- self employed and liable for the debts of the business to the full extent of personal assets and can be made bankrupt.
Partnership – above liability also applies to partners unless they have formed limited liability partnership.
Limited Company – As the name suggests, the liability of the business is limited to the assets owned by the business, not you personally (However, lenders, landlords and some suppliers may require personal guarantees).
In order to ensure that you are filing your accounts and various tax returns in the correct formats and by the relevant deadlines e.g. statutory accounts, annual return, VAT, Self-Assessment, Corporation Tax, PAYE, etc it is essential that you set up a proper book keeping system.
A huge saving on accountancy fees can be achieved if you do this yourself. There are many low cost or inexpensive accounting systems to record your business transactions and the keeping of your accounts does not have to be the nightmare that it once was with bags of receipts, invoices, statements etc all over the place.
An accountant can help choosing the right system for your needs and guide you to producing the information that is required for HMRC, Companies House and Banks/Lenders. Many modern software systems mean that a better control of the state of the financial affairs of the business can be kept and you can know how your business is performing at the push of a button.
Many myths exist about what you can and can’t claim in the way of expenses. Getting it wrong can be costly. An accountant should make sure you claim all allowable costs and what HMRC call those that are wholly and exclusively for business.
If paperwork isn’t “your thing” most accountants offer book keeping services to take away the stress but charges can vary considerably. If in doubt, ask for a quote for services.
Registering your business with HMRC
All businesses must register with HMRC so annual tax returns can be issued. Personal tax returns will be required for individuals (Self Assessment) to pay income tax on the profits your business makes together with any applicable National Insurance. Companies are required to submit annual corporation tax returns and pay corporation tax on profits.
You must also register for VAT if you expect your takings to be more than the registration limit (currently £82,000).
If you are taking on employees a PAYE scheme must be set up and earnings advised to HMRC under the system of RTI (Real Time Information).
Companies must also put together statutory accounts to be filed with Companies House. There is also a requirement to file an annual return.
It can be daunting dealing with government paperwork and compliance when you run your own business. This is why so many small business hire an accountant when the first tax filing is due. Preparing your tax documents correctly could save you money by filing on time, paying the correct amount of tax and avoiding penalties and interest.
- Credit control
- Buying an existing business
An accountant can help you out at any and every stage of your business. Can you honestly say that you are on top of all the essential business tax issues? Well probably not – but that is an accountant's job. Taxation can be a large business expense and a good accountant can effectively minimise these costs.