Contractor accountants - The Key Tasks They Perform

Contractor accountants - The Key Tasks They Perform

Contractors don't have to use contractor accountants. But, for most freelancers using a limited company, the costs of their services are far outweighed by savings made by paying only the owed tax, making optimum use of tax allowances and not spending lots of time completing paperwork.But what exactly do accountancy services providers do? Here are five key tasks they perform:1: Prepare And Submit Annual AccountsBy law all UK limited companies must file formal annual accounts with Companies House once the financial year has been completed. Failure to do so can result in serious penalties for the directors of a business. The paperwork must be prepared in a certain format and, although many businesspeople choose to file their own, most leave preparation and submission of accounts to qualified professionals.2: Complete Tax ReturnsThe tax collecting authority in the UK, Her Majesty's Revenue and Customs (HMRC), requires all businesses and many individuals, including flexible workers, to complete a tax return. The tax return is used to determine how much corporation tax, income tax and National Insurance Contributions (NICs) are due for payment. The calculations are quite complex and best left to tax advisers who have access to the latest taxation legislation and guidance.3: File VAT ReturnsThe UK has a sales tax, called Value Added Tax (VAT). Every business that earns over a particular threshold must register with HMRC and collect the tax on its behalf. Companies can claim back VAT on the items they have bought, such as supplies or services. Each year, or once a quarter, HMRC expects to receive a VAT return that shows how much VAT has been received from clients and how much paid out on expenses. The balance will be payable either to the company or, most commonly, HMRC. Completing VAT returns is straightforward, however many flexible workers ask their accountancy practice to complete the paperwork on their behalf.4: Calculate PayrollEach month, small knowledge worker firms make payments of salary, dividend and expenses from business bank accounts into personal accounts. Even those employed by their own company should provide themselves with a payslip and other income tax documentation monthly or weekly throughout the financial year. There are many service providers offering payroll services, and most accountants will do payroll for their clients, usually for an additional fee.5: Respond To HMRC Enquiries and InvestigationsFlexible knowledge workers sometimes find their firms being investigated by HMRC - either when there has been an error in tax paperwork or as part of a random compliance-monitoring programme. For many, this is a stressful event because of concerns that HMRC will find additional tax to pay, possibly with interest and penalty payments on top. Professional assistance is generally recommended and can often help shut down an investigation before it gets going.A specialist accountant will also have experience of dealing with and advising on tax legislation that specifically targets freelancers, such as IR35 and the Managed Services Company (MSC) legislation.

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