Do I Need an Accountant for my Limited Company?

Is it a legal requirement to appoint an accountant?

Before we go into the advantages of hiring an accountant for your limited company, let’s touch on a common question: whether a Limited Company is legally required to hire the services of an accountant.

The answer is that there is currently no legal obligation for Limited Companies to employ an accountant. If a limited company meets the following conditions, it is also completely exempt from being audited by an accountant:

• If the company is categorised as a ‘small business.’ In HMRC’s view, a company will be classified as small if meets two of the following conditions: an annual turnover of less than £10.2m; fewer than 50 employees; and has a balance sheet turnover of less than £5.1m.
• Company members can also request an audit where they hold 10% or more of the share capital. Likewise for companies limited by guarantee: if only 10% of all members request an audit, one will not be granted. 

Even if this is the case, small companies should still utilise accountants. A skilled accountant can offer general business advice, assist with business decisions, oversee annual accounts, handle all aspects of the accounts filing, assist with HMRC and Companies House, and more!

Do Small Businesses need accountants?

Small businesses might not have to hire their own limited company accountant, but they should seriously consider the services of one.

When a business is first established, accountants can assist with a wide range of matters. This might include:

Business Strategy

An accountant may be of assistance to a company in a number of different strategic areas. When looking to acquire a limited company, for example, an accountant might examine the business’s accounting records to verify that the figures on the balance sheet are correct. Accountants can also assist with the sale of a firm and with creating and forming a new limited company.

Helping with HMRC

When a small company is founded for the first time, dealing with official government paperwork might be complicated and perplexing. HMRC, for example, has lots of rules and regulations over how documentation must be submitted and in conjunction with, making mistakes can be easy at first – especially if it’s a company director’s first business. If a small company were to hire an accountant however, the complexity and danger of making errors would be minimised.

Business Growth

Accountants may also assist with company development, which is something that many businesses overlook. Accountants can help with taxes like corporation tax, and use accounting software such as Xero to analyse cash flow, annual accounts data, and even tax efficiency if the firm starts to grow at a rapid pace and adds staff, clients, or locations.

Accountants aren’t just limited to small businesses, however. A good accountant can assist a wide range of organisations, including medium-sized businesses and large companies, and accountants may benefit major organisations in a multitude of ways. 

How can an accountant help my Limited Company?

Here are just a few examples of the many services the right accountant may provide to any size company.

Check when you should hire an accountant for your Limited Company

Registration with Companies House

The intricacies of the Companies House system may sound intimidating at first, especially if you’re a new company.

An accountant can help you with this. They can assist you in registering your business with Companies House, which reduces some of the accounting paperwork you’ll encounter during the early stages of your new firm.

In addition, accountants can help you submit your company accounts. Company accounts must be filed with Companies House within 9 months of the accounting reference date (ARD), and this is generally the anniversary of the last calendar day of the month your firm was created. Take, for example, a business incorporated on April 6, 2022. The first ARD would be 30 April 2023 – and 30 April for each year after that.

If you’re going to be an employer, your accountant can also register your firm for VAT, Corporation Tax Return filing, and payroll obligations. They’ll also be able to give you tax advice based on the type of business you’ve established.

Payroll

Payroll might be handled in-house by using accounting software in larger organisations, but it’s frequently outsourced to an accountant in small firms.

Accountants can handle the paperwork associated with paying staff, as well as ensure that accounts are correctly balanced after workers have been paid. Outsourcing payroll to an accountant may save you money by eliminating the expense of purchasing pricey software and training.

VAT

VAT, or value added tax, is notorious for being complicated and hard to understand for new business owners.

However, a business can use an accountant to help them navigate their VAT returns and claim all eligible VAT to maximise their cash flow. Accountants can also file the required quarterly VAT returns, ensuring that the firm is in compliance with tax laws and therefore protected from unforeseen penalties.

Tax Returns

A limited company will receive a notice from HMRC at the end of each financial year, or the company’s accounting reference date, to submit a corporation tax return. The aim of the return is to show your taxable earnings, even if the business has a loss or falls below the tax threshold.

The company’s profit and loss account are used to calculate tax adjusted profits. The paperwork may appear complicated at first sight, but an accountant can quickly prepare and calculate how much Corporation Tax the limited firm owes as well as when they must pay it, helping save business owners valuable time.

Avoid these top 6 common tax mistakes

Bookkeeping

Bookkeeping is a time-consuming procedure for smaller businesses, but it’s an important duty. If records are not kept of invoices and receipts, finding missing papers at the end of the financial year becomes more difficult, potentially resulting in penalties.

Bookkeeping is a major part of an accountant’s accounting duties, which means they can easily manage record keeping and create a neat paper trail for the statutory accounts – relieving the burden of the end-of-year financial close.

Annual Accounts

At the end of each financial year, limited companies must submit their annual accounts to HMRC and Companies House. If a firm fails to file their annual accounts, they may be fined or struck off from the register.

Using the services of a limited company accountant prevents this from happening. To guarantee that the paperwork is submitted on time, an accountant can create and compile the documents required. Balance sheets, profit and loss accounts, a company director’s report, and any notes are all included in the information an accountant will produce to ensure the company accounts are compiled – and filed – correctly.

Peace of Mind

One of the most significant, yet often overlooked, benefits of hiring a limited company account is the peace of mind that they can give company directors.

Accountants simplify the bookkeeping and filing process and remove the confusion of muddling through company accounts and generating paperwork. This saves time, which in turn enables the business to grow its revenue through a steady financial footing.

Accountants don’t have to be costly either. In fact, we’ve broken down a common misconception about accounting costs which you can read more about here.

To conclude

For the typical small business, taking care of its own accounting is a burden and a minefield, which is where the help of an accountant and their professional advice can make all the difference.

Accountants can help any business director in any industry. Even business owners who are self-employed can use accountants to assist with their own tax return. Working alongside an accountant means never worrying about incurring fines, accidentally missing corporation tax deadlines, or muddling through hefty paper trails.

At Raw Accounting, we’ve seen firsthand how our services have benefited our clients. Let us give you back the time you need to grow your limited company by taking care of your accounting and bookkeeping needs. Find out more today.