How to choose an Accountant

More and more people are choosing to operate through their own limited companies, partly due to changes in corporate working practices but also because of the freedom, control and enjoyment that comes from being your own boss. The fact that contractors, consultants and freelancers can command much higher daily rates of pay may also be an influencing factor, but surely this is only to be expected, bearing in mind the lack of holiday and sick pay, and the other additional benefits which are lost when moving from employment to contract work.

The first step is to set up your limited company and then to appoint a good accountant. This is without doubt one of the most important aspects of being a contractor and of running your own limited company. You have enough on your plate and the last thing you need to worry about is:

  • Missing a tax deadline
  • Making sure that your tax submission is accurate
  • Miss out on any opportunity to maximise your tax allowances.

How to find the perfect contractor accountant for you!

It might sound obvious now, but in the excitement of securing a contract and forming your own limited company, you may forget about appointing an accountant and then rush into it later, only to regret that decision in the long run. So making the right choice when you first set up in business will save both time and money. Find below a selection of the top tips to finding the right accountant:

Are they experienced in providing services to contractors and freelancers?

You could be forgiven for thinking that it doesn't really matter which accountant you choose as they are all the same, providing that they are qualified. But this is definitely not the case. For example, it makes no sense to choose an accountancy firm which predominantly provides services to trades people and shop owners. Although they also run their own businesses, their needs are very different to yours, and a key example of this relates to IR35:


This was brought about by the government to ensure that small companies, especially contractors and freelancers, operated their own limited companies in the right and proper manner. This included having the same level of risk, responsibility, liability and control that other directors of limited companies accept when they manage their own businesses.

However, if you are deemed to have the same level of risk, responsibility, liability and control as a permanent member of staff, you will most definitely be classed as being inside IR35 and so your tax liabilities will be different.

If you are at all worried by IR35 or have any further questions please call our IR35 specialists on 01442 275789, email or click here to read more about IR35.

Is the Accountancy firm caught by Managed Service Legislation (MSC)?

A Managed Service Company (MSC) is one which literally takes over the running of a contractor's or freelancer's limited company. By grouping contractors together and offering a 'managed service' scheme, numerous tax laws can be bypassed, including IR35. A number of MSCs sprang up a few years ago when the owners of these companies realised the potential benefits, but the practice has never been condoned by professional accountancy bodies and has always been viewed as an attempt to take advantage of HMRC tax loopholes.

Last year the Government closed this loophole, effectively ruling out the use of Managed Service Companies and affecting more than 200,000 contractors in the process. In light of these new changes it is very important that you check the credentials of any accountancy firm thoroughly, to ensure you won't subsequently be caught by this legislation.

KPMG have developed an intensive and detailed review which establishes if a firm should be classed as a Managed Service Company or not. So the easy way to make sure that your chosen accountancy firm is NOT operating in this way is to find out if they have been reviewed by KPMG, to ensure that they are fully compliant with all HMRC regulations.

Who will be your accountant and can you meet them?

Call centre type firms do usually offer slightly lower rates but it's unlikely you'll ever speak to the same person twice, or ever be able to meet with your own personal accountant.

Where are they based?

Some people would argue that it doesn't really matter where your accountant is located. But unfortunately, the UK tax system is complicated. To give you an idea, the HM Revenue and Customs Expenses Policy booklet is over 100 pages long, so just imagine what the corporation tax laws look like!

So it makes sense to have somebody close by to explain things in person if you need them to. It will give you a certain level of comfort and reassurance to know that if you don't understand something, or if you have any concerns, you can meet with your accountant without driving 200 miles or more! After all it's your company and you, not your accountant, will be personally liable if anything goes wrong.

Finding the genuine article

Beware of accountants bearing gifts of huge expense policies, as they are rarely true. Many companies have sprung up recently to tap into the huge contractor market, but they have little experience in managing a contractor's needs. At best you may waste time looking for another firm, and at worst you could be caught by MSC legislation and end up having to pay back taxes or even penalties. And finally, remember this:

If they don't have the word 'accountancy' in their company name, they probably aren't accountants!

If you have yet to form your limited company, our On-line Company formation Service offers same-day formations and includes opening a Company Bank Account, VAT/PAYE registration and advice on share structure.

If you wish to appoint us as your accountants immediately, the quickest and easiest way to do so is by accessing our Client Agreement Form

If you are thinking of contracting through your own company, you could also read our new straightforward guide on How to Contract through your own Limited Company. You'll be surprised how little time it takes and just how easy it is.

You may also like to read our Guide to Contractor Expenses, Take home pay Limited company or Umbrella company - The differences and take home pay case studies of a contractor using an umbrella company and another who's working through their own limited company.

If you have any question about contracting or would like any further advice please call our new business team on 01442 275789 or email