For small businesses, especially new start ups, funds are often tight and any outlay needs to be carefully considered to ensure it is good value for money and the best use of the limited resources available. So all too often the thought of using an accountant is put on the back burner or completely abandoned and the money used elsewhere in the business.
Is this really the best thing for your business?
Regardless of how well your business is doing or its structure, one thing that you must do is register it with HMRC and complete an annual set of accounts and a tax return. This must be done even if the business is making a loss. Each year there are changes to tax rates, reliefs, forms and laws; keeping up to date with the changes is essential as HMRC do not consider “ignorance” or lack of knowledge to be a valid excuse for getting things wrong. In fact the penalties for getting things wrong on your tax return, known as the inaccuracy penalty, can be anything from zero to 70% of the extra tax due; so it can be an expensive mistake to make.
A reputable accountant should keep you up to date on your accounts and tax responsibilities making sure that you do not miss any deadlines or make late payments so your time can be spent running your business which is probably the best use of such a scarce resource.
Extracting Money from your Business
The main reason for setting up your business is to provide some income. It wouldn’t be a business if it was not making a profit. So, as a business owner, you will want to know how to “extract” your profits, after allowing for any tax due. Your accountant will be able to tell you the best way of structuring your business and doing this. They should guide you through the minefield of whether to structure your business as a sole trader or as a limited company.
What costs and expenses you can claim against your tax bill
Some costs are obviously allowable against your tax bill such as stock, business postage and so on. For other cost and expenses the rules are not always clear. Take the common misconception that business attire (suits, smart clothing etc) must be an allowable cost. This is not the case as the BBC’s Sian Williams found out in a very high profile court case where it was deemed that the cost of the clothes that she wore when presenting BBC Breakfast news were not an allowable cost as she needed the clothes for “decency and warmth” even though it was claimed that she said that she would present the news naked!
A reputable accountant will be able to tell you exactly what the rules are for claiming costs ensuring that your accounts are correctly prepared.
A reputable accountant
Although not everyone is aware of this, anyone can call themselves an accountant. There are no laws in the UK that state that an accountant should have passed certain exams nor do they need to have a certain amount of experience or be registered with an accounting professional body. In fact from time to time we hear some terrible horror stories of unscrupulous accountants who have not always been completely honest with their clients or acted with reasonable care and in their best interests.
There is no guaranteed way to avoid falling prey to an unscrupulous accountant. When appointing an accountant the best thing is to get recommendations from those already using their services and check that the accountant is a member of a professional accountancy body as this will mean that they should have professional indemnity insurance.
The professional accountancy bodies to look for are the Institute of Chartered Accountants in England & Wales (ACA or FCA), Association of Chartered Certified Accountants (ACCA or FCCA), Institute of Chartered Accountants of Scotland (CA), Institute of Chartered Accountants in Ireland (ICAI), Chartered Institute of Management Accountants (ACMA or FCMA) or Association of Accounting Technicians (MAAT).
How much will it cost?
Appointing an accountant needn’t cost the earth especially if you are prepared to do some of the bookkeeping yourself. Accountancy fees can be drastically reduced if you use accountancy software or use a Challenger Bank Accounting App for all your business transactions.
Using the latest technology can be a huge time saver meaning much reduced accountancy fees much like our Challenger Accountancy Service does (click here to find out more).