Do you need an accountant for a limited company?

When you become a director of a new limited company, you automatically take on a number of legal obligations. These include maintaining accurate records and accounts and submitting them to Companies House and HMRC on time.

In recent years, we have seen the rapid rise of really excellent and time-saving online accounting software packages, such as FreeAgent (our favourite), Xero and Clearbooks.

These tools have made accounting far easier for small business people. You can submit VAT returns online, set up a company payroll, and even file your personal self-assessment returns.

But, does this mean that you can take on all of your company’s accountancy duties yourself? Do you actually need an accountant for a limited company?

In fact, are you allowed to submit your company’s accounts yourself, assuming you are not a qualified accountant?

Are you legally required to hire an accountant?

No, you are under no legal obligation to hire an accountant. If your company meets the definition of a ‘small’ company, your business also does not need to be professionally audited.

According to the HMRC definition, a small company is one which has at least 2 of the following:

  • a turnover of £10.2 million or less
  • £5.1 million or less on its balance sheet
  • 50 employees or less

8 reasons to hire an accountant for your limited company

From our experience of running small companies, and working with hundreds of other small firms over the past 20 years, there are many powerful reasons to hire an accountant.

Here are some of them.

1. You could save time

Maintaining your company’s books isn’t easy for most of us. Unless you have previous accounting experience, you may find that you spend a great deal of time maintaining your books. Even with the assistance of online accounting software. This is valuable time you could be spending building your business.

2. You could save your company money

A good accountant will make sure that your company doesn’t pay any more tax than it has to. An accountant will understand the most tax-efficient way to run your business, and ensure that you comply with the rules. They can provide guidance on how best to extract profits from the company, as well as how to minimise corporate taxes.

3. Essential help during the start-up process

What is the most tax-efficient way to set up your company’s share structure? Do you need several share classes? Are you considering splitting shares with your spouse? All of these questions are crucial when setting up a new company.

4. Dealing with HMRC can be frustrating and stressful

If your accounting needs are very minimal, your dealings with HMRC may also be hassle-free. But, in reality, things go wrong, and mistakes need to be corrected. From our experience, dealing with HMRC directly for the uninitiated can be very frustrating and certainly a key reason for hiring a professional with experience in dealing with the taxman.

5. Specialist tax knowledge

As well as dealing with the more familiar aspects of accounting – such as which expenses you can offset against your company’s Corporation Tax bill, a knowledgable accountant will be aware of the most up-to-date tax rules and allowances. For small limited companies, these include IR35, MSC legislation, CIS, and capital allowances.

6. Avoid penalties

However diligent you are, with so many forms and returns to keep an eye on, it can be hard to manage tax deadlines if you decide to look after your own accounts. Aside from Corporation Tax, VAT and PAYE obligations, all companies must submit an annual Confirmation Statement (to Companies House), as well as Annual Accounts. You also need to keep on top of your personal tax situation – via the Self Assessment process.

7. Avoid tax enquries and investigations

Most HMRC tax investigations are triggered by so-called ‘red flags’ in accounts submissions. These red flags will include the existence of inaccuracies and late submissions. An accountant should keep on top of all of your company’s tax deadlines, and minimise the chances of errors being made. Having said that, we always recommend you take out tax investigation insurance, because it is inexpensive and provides peace of mind.

8. And finally…

The cost of hiring an accountant to look after your company’s affairs is fairly modest given the amount of work and responsibilities they will take off your shoulders. A good accountant will look after your company’s affairs, potentially save you money, and let you concentrate on what you’re good at…. running your business.

Try our growing list of limited company accountants to get started!