The Contractor Accountants Guide

For freelancers and contractors getting a good accountant is one of the most important things to do when it comes to the smooth running of your business. That’s because contractors and freelancers find themselves the subject of more complex financial legislation than most other professions and for many contractors their accountant will be one of the few, if not the only professional advisers that they have to deal with. A good contractor accountant will end up saving you money as they will prevent you from incurring any fines or penalties with HMRC and will ensure that you don’t pay more in taxes than you need to. More importantly for contractors they will be invaluable to the business when it comes to new legislation as they will keep you up to date on everything related to the formation and taxation of Limited Companies, as well as everything affecting umbrella companies, income shifting, offshore accounts and all the intricacies of IR35. Lastly, it is also important to remember just how much time they will save you. Aside from taking you step by step through the accounting process and highlighting any potential risks or pitfalls to your business, they will also free up more time for you to concentrate on what you do best – your contracting work – and allow you to not have to waste time pouring over your accounts. Of course, getting a really good and reliable accountant is easier said than done. You’ll need to do your research to find one who perfectly matches your needs. And you’ll need to ask yourself a few questions first.

  • How do I want to pay them?
  • Do I want them to be local or national or online?
  • Do I want to meet them in person?
  • What are my business accounting needs?
  • Do I need a contractor accountant who can give me information on certain types of tax legislation which are specific to my industry?

Our contractor accountant guide will highlight some of these questions that you need to ask yourself and help you to decide what type of accountant you are looking for, before suggesting a number of contractor accountants in your area and nationwide. Once you have decided upon the type of accountant you are looking for, you should then draw up a list of five to ten accountants and do some research online to see what other people have to say about them. After that, send them an email or give them a call and have a chat to see if they feel like a good fit. After all, you may be using their services for many years to come so it pays to get it right from the beginning. Meanwhile, here are some of the factors you should consider:

What Professional Qualifications Do They Have?

Every accountant should be qualified with either the Institute of Chartered Accountants, the Association of Certified Public Accountants, the Chartered Institute of Management Accountants or the Association of Chartered Certified Accountants. You should also look for accountants that have not just qualified, particularly as you are going to be looking for ones that are specialists in their field. When it comes to accountants, and particularly contractor accountants, the longer they have been doing it the better. Many of them will no doubt have a number of references and recommendations from third parties, possibly including awards. These are good to see if they are from a reputable source, but check that third party before being too impressed. Are they a company you have heard of? Is it an award you have heard of? Does it have the backing of some big name companies? If not, don’t pay it much attention when coming to your decision.

Are They Contractor Accountants?

Are they specialists in the contracting market? This is the most important point of all. Do they know their way around umbrella companies and all the various delayed payment mechanisms that freelancers and contractors often use. Are they experts in the IR35 legislation and have they got a long history dealing with it on behalf of other contractors? So complex is this legislation that it is essential to have an expert, not just an accountant who offers a broad range of services but is master of none.

Do You Want an Online Service, a Local Service or a Combination of the Two?

This will depend on how you want to run this part of your business but many people prefer to be able to go along and talk to someone in person. Remember that there will inevitably be lots of complicated tax issues to discuss and decide on so if you have someone managing these decisions for you or with you it is probably best to be able to go along and chat with them. Finding someone local or who is easy to meet up with is invaluable. On the other hand, some people like to handle all of their taxes online and to be able to log in, fill out the forms and leave the accountant to get on with it. There are companies that offer this type of service too. Combining both of these options is sometimes the best way forward. By filling in your taxes online and keeping records yourself you keep up to date with what is going on and are always able to access your tax records (and if you choose to leave your accountant you can keep all that data yourself). However, by also choosing a company that gives you your own dedicated contractor accountant to handle your taxes and sort through all those forms, you get an expert to organise your taxes in the most efficient way and someone to speak to when you have a question.

Do You Want To Go With a Small or Large Accountancy Firm?

Another matter of personal preference. Some people will prefer to go with a smaller, local company where they can build a rapport with the staff and feel like a valued and important customer. Others will prefer the efficiency, reputation and security of a larger, more corporate environment. Perhaps the most obvious answer is to go with a larger company that still offer dedicated accountants who will always be there for you and will build that same rapport, but again, it all comes down to personal preference.

Why Is a Dedicated Contractor Accountant So Important?

If you are going to be trusting an accountant with your business, you want to ensure that you will always have that same dedicated contractor accountant and not one of their team or one of the company’s more general accountants. You want to ensure that you will always get the same person and that you can contact them, and only them, whenever you need to. As mentioned above, you should also seek out a dedicated accountant even if you are handling your taxes via an online service.

How Much Will They Charge For Their Services? What Does That Include?

You will generally find that most accountants charge similar prices to one another but it is worth drawing up a list and comparing all their prices just to be certain. Clearly, if a contractor accountant charges a bit more than a general accountant you should take this on the chin. They will be a specialist and worth paying for. All of them should offer a fixed fee which you are told up front before you begin. Don’t go with any accountants who charge entry or exit fees – there are plenty who don’t so avoid this. Similarly, avoid any who charge a fee dependent on your earnings. When it comes to what they should include for the price, you are looking for it to include a full accounting service including your tax returns, your VAT, PAYE, end of year accounts and any dealings with HMRC, as well as any and all of the ongoing compliance and advisory services that come with contracting. Additionally you should find out whether they cover you for your personal taxation and if not, ask how much extra that costs. Finally, find out how those fees will be paid and when they want them paid.

Do They Offer Any Extras?

Will they be bringing anything extra to the table over and above their competitors? Will they offer extra services such as company formation or tax saving advice?

Do You Know Any Other Contractors Who Have Used Their Services?

Perhaps most importantly of all, if you can get a contractor accountant by word of mouth, then you should. If another contractor recommends an accountant to you and tells you they have saved them a fortune with their taxes, then get their number and investigate them immediately (provided of course that the contractor is not on commission!) Do your research online and in contractor forums and if you like what you see, then arrange a meeting.

Tips on Finding The Perfect Contractor Accountant

Finding a good contractor accountant

Finding a good contractor accountant can make a contractor’s life so much easier and can save them a great deal of money. That’s why it’s one of the most important things a contractor will do when they are first starting out. Not only will a specialist contractor accountant save you time and money by sorting your accounts for you and leaving you free to do more contracting, they will also keep you from falling foul of HMRC by paying too little, or costing yourself money by paying too much. A good contractor accountant will keep you up to date with all the latest legislation on umbrella companies, offshore accounts, delayed payments schemes and most importantly for contractors, IR35. If they do their job correctly a good contractor accountant should help you to actually increase your take home pay within the law and should pay for themselves each and every year on the money they save you. But finding the perfect contractor accountant isn’t easy so this article will offer some pointers as to what to look for and when and where to look:

When Should I Start Looking For a Contractor Accountant?

Ideally, anyone who is just starting out in the world of contracting should think about getting themselves a decent contractor accountant before they start. In order to maximise the amount of money you earn you should not waste a single day on your accounts. Why not get those accounts set up correctly from the beginning by an expert? A really good contractor accountant will get you and your new company registered at companies house, and will register you with HMRC before setting up all the financial paperwork and accounts for you.

What About If I Have Been Contracting For Years?

If you are unhappy with your current accountant and think you could get more out of a contractor accountant then it is just as important for you to make the switch. Any contractor accountant worth their salt should be able to make that switch simple and free of any hassles. Pick three or four contractor accountants you like the look of and give them a call. Find out what they charge and what services they can offer you. Also, if you are changing mid-year, see if you can negotiate discounted catch-up fees for the year.

Check Their Credentials

Always ensure that the contractor accountant you are joining is fully qualified and is registered with one of the main accountancy regulatory bodies such as the Association of Chartered Certified Accountants, the Chartered Institute of Management Accountants or the Institute of Chartered Accountants. Furthermore, see if they have won any awards and recognition of their professional standards (although these should be checked too as they are easy enough to fake) and don’t be afraid to search then out on google and see what other people have been saying about them.

Check Their Specialist Credentials  

This is the most important part for contractors. Clearly the whole point of finding a specialist contractor accountant is to find someone who has spent the last few years working exclusively on contractor issues and who knows their way around every nook and cranny of the contractor tax legislation. Contractor specialists will be able to talk you through your best options for company formation, how to draw income efficiently from that company and how to stay compliant with the latest IR35 legislation. When doing your research, talk to them and get a feeling for how much they understand about IR35, about the concept of ‘disguised employees’ and that they understand that IR35 will vary from contract to contract – ask them if they offer services such as free IR35 reviews. Find out too if they know anything about managed service legislation. Managed Service Companies have fallen out of favour over the last few years as HMRC has cracked down on them but any contractor tax specialist who has been in the trade for years will know all about them and should probably warn you against them.

Check Their Location

Decide up front whether you want a local accountant or are happy to deal with a national organisation online. Many people feel better talking about their personal and business tax arrangements fact to face, whilst others prefer to just leave it to their accountants to handle the whole thing. If you are lucky enough to have any contractor accountant specialists in your local neighbourhood then it probably makes sense to go with them. These days however a lot of people are opting to go online and deal with a dedicated account manager via an online business. This offers the best of both worlds, as you can handle most of your accounts on the computer, have access to them yourself at any time and deal with them from the comfort of your own desk / home; but simultaneously you know you have a dedicated account manager at the end of the phone and someone who will be there to guide you through any complex areas of taxation or show you how to save money and pay less tax.

Check Their Fees

Are they in line with everyone else’s? Most accountants will charge the same sort of amount for this type of work. If one is way off (too cheap or too expensive) then you need to ask yourself why. A contractor accountant specialist will charge more than a standard accountant and that is fair – they have more specialist knowledge and will be better for your business. Avoid companies looking to make you pay exit fees or entrance fees and particularly steer clear of those who base their fee on how much you earn. Look instead for a fixed fee that covers all of your needs, from end of year accounts to dealing with HMRC and from handling your PAYE and VAT, tax returns and anything else that might come up, especially contractor-specific issues of compliance. Try and find an accountant who will also include all of your personal taxation needs in their price and inquire whether they will include other extras such as HMRC tax enquiries, implementing complex share structures, company formations etc

Whilst many contractors think it’s an effective use of their time to manage their books and accounts, this more often than not turns out to be very costly decision not only financially but in time. By having a professional accountant working with you you can easily offset the costs from money that will be saved by their professional knowledge and in time.

Not all accountants are created the same and the local accountant on the high-street may not be the most suitable. You should always look for accountants that specialise in or have strong experience in dealing with freelancers and  contractors as they are more in tune  to what is required for the sector. All good contractor accountants will do a contract audit once they start working with you to make sure that your IR35 is in check. A number of accountants that specialise in contractor marketplace are offering online portals which is similar to what umbrella companies offer, these portals allow you to upload your expenses, timesheets, issue invoices  and manage your tax and VAT.

When deciding on a new accountant  it’s important to make sure you find out exactly what is included in the price on what services they will be providing. A number of  accountants’s that offer their services to contractors will offer very low monthly  fees but charge for many extra services. Another point that was mentioned by Paul Rawlings in a recent interview regarding limited companies and picking a accountant is it a good idea to make sure the person you speak to in the interview is the person who will be dealing with your account on a day to day basis. You don’t want to be in a situation where you are asking questions to a different person every time you call. It’s very frustrating and not time effective

How to find your new accountant

There are a number of websites that provide reviews and recommendations of accountants some of the best that I’ve found are;

Contractor Supermarket

While the design and layout isn’t that appealing it does give you an overview look at some contractor accountants. Information you can find out about each accountant covers

  • If they offer an account manager
  • Do they provide an portal
  • If they offer company formation
  • Monthly Price

Website screenshots

Freelancer Supermarket

Freelance Supermarket do a great job of really going into detail and provide a league table of the best contractor accountants in the UK.

The scoring formula they use is base on the following formula
Score = ((competency score (50%) + A&A (40%) + benefits package (10%) + bonus) x 1000

Formula breakdown

Competency score is generated from questions that are asked the accountant clients and cover Price, Customer Service, Would you work with them again, Proficiency of Payroll team and Joining and / or leaving process

A&A stands for Audited and Approved, this indicates if the accountant has been audited by HMRC or any third party in the last 12 months.

Benefits package points are given if the accountant offers any of the following

  • Account Manager
  • Direct Line to Account Manager
  • Online Portal
  • Pension
  • Child Care Vouchers
  • Free Expense Processing
  • Minimum Joining Period
  • One Week or Less Notice
  • Free Tax Planning

Bonus Points

Scoring Bonus: Users are rewarded an extra 0.5 points each time they receive 10 out of 10 for a particular competency.

Volume Bonus: Users are rewarded an extra 0.1 points each time they receive feedback through our website. This provides an incentive to request feedback whenever possible.

While I really like the amount of detail Freelance Supermarket goes into I do like to see individually reviews to really get an idea of how contractors feel about the service.

 Website screenshots 

Google Local

While all the details on Google Local are added by the accountant what is really valuable about Google Local is the reviews. More often than not if an accountant has reviews they are going to be bad. This is down to our nature to tell the world about this that went wrong instead of what was good. So look and no reviews as an indication that everything is good and if they have positive reviews then they are worth a call.

Another great way of finding quality accountants is by talking to other contractors or freelancers as you’ll always get an honest answer from a fellow colleague. Social networks like LinkedIn and Twitter can also be a great place to get some background information about the accountant that you may work with.

 Website screenshots 

Online Accounting Solutions

It used to be that small business owners who took an interest in their own accounting had the choice of two products when it came to accountancy software – Quick Books or Sage. These days however, as more and more companies manage their businesses through cloud based services, a number of viable alternatives have popped […]