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Monthly Archives: February 2014

Is your accountant qualified?

 

 

Many people are not aware that “accountant” can be the name used to describe a range of different people, some of whom may not even be qualified.  This is not like a Solicitor which means someone that is qualified to give you legal advice. So is your accountant qualified?

Anyone in the UK can call themselves an accountant or book-keeper even if they have had no training or have no professional qualifications.  This could mean that you have no comeback for the advice you are given or if any laws are broken.

If you are in business or need advice about your personal finances it would probably be best to engage a professionally qualified accountant, one that has taken and passed the stringent exams set by one of the professional institutes (the ICAEW for example requires the passing of 15 exams and over 3200 hours of relevant work experience).

Members of these professional institutes (shown below) not only have to have professional indemnity insurance to cover them, and you, if anything goes wrong but they also have to abide by the code of professional ethics set by their institute, meaning that if your accountant gets it wrong you can complain to the institute that they belong to.

Here in the UK there are many qualifications that an accountant can hold, these include (in no particular order)

Many qualified accountants may even hold more than one qualification, for example they have both FTII and FCA after their name meaning that they are a fellow of the Charted Institute of Taxation and a Fellow of the Institute of Chartered Accountants in England and Wales.

Each of the institutes show above will allow you to check if someone that is claiming to be a member of their organisation does actually belong and can advise you if this is not the case.

There are also other professional organisations that accountants may belong to, these include :-

  • The ICPA : an Accountancy organisation, representing the 60% of Accountants in practice not represented by the CCAB bodies
  • Institute of Financial Accountants : a professional body for financial accountants and managers primarily serving small and medium enterprises.
  • The Association of International Accountants : a professional accountancy body that promotes the concept of ‘international accounting’ and has created a global network of accountants in over 85 countries worldwide.
  • The Federation of Tax Advisers : Recently merged with the Institute of Financial Accountants and now the tax faculty of the IFA.
  • IAPA : The International Association of Practising Accountants is a global association of independent accountancy and business advisory firms who provide accounting, audit, tax advisory and business consultancy services.

Are you better off as a sole trader or a limited company?

Starting a business is a tough process. Maybe you decided to be a sole trader as there was less formality and paper work involved in the set up.

The decision on your appropriate business structure is not an easy one – it certainly isn’t a ‘one size fits all’ answer.

Your personal circumstances should determine your choice and only you can decide the appropriate structure.

Putting aside the misleading perception that a limited company gives you greater status or credibility then, in my opinion, there are two major issues to consider in deciding your business structure:

Limited or Unlimited Liability

As a sole trader there is no distinction between you and your business.

You do not need to have a separate business bank account.

All the debts of the business are your debts.

If the assets of the business do not cover the debts then your personal assets could be used to pay the debts – including your house!

The debts of a limited company belong to the company, which is a separate legal entity.

Except in cases where personal guarantees have been given, your personal assets will not be used to pay the debts of the company.

Maybe this is a more attractive proposition than a sole trader or unincorporated business structure.

Tax

The second reason for a limited liability business is based on tax savings.

Tax as a Sole Trader

As a sole trader you pay the following:

  • income tax on profits over your personal allowance, assuming no other income
  • Class 2 National Insurance at £2.65 / week
  • Class 4 National Insurance on profits over £7,605 at a rate of 9% up to £42,475 and 2% thereafter

If your profits are below the personal allowance of £8,105 then in all likelihood it would be better to operate as a sole trader.

You will pay no income tax and will only pay a very small amount of class 4 national insurance if your profits are over £7,605.

If you profits are below £5,595 then you can also apply for an exemption to class 2 National Insurance.

Tax as a Limited Company

A limited company pays corporation tax at 20% on its profits (up to £300,000 where the rate rises).

Profits can be withdrawn from the company by way of a salary for the director(s) and dividends for shareholders. Again this assumes that the directors / shareholders have no other income.

 

Why not check how much money you could save by converting to a Limited Company – Contact us on

0203 475 8850 for a free initial consultation

Is there a best time to change accountants?!

Changing your accountant is a serious step. One that is normally only considered when there is a breakdown in the relationship or the fees charged are too steep in relation to the service the accountant is providing.

There may be several other reason you feel it is time to change perhaps you feel your accountant is not keeping up to date with all the technological advances in the financial industry.

How easy is it to change your accountant?

Changing your accountant is normally quite straight forward. It’s normally not practical to wait for an obvious cut-off point such as the end of a financial year. It will, however, be advantageous if you can pick a changeover date when there is as little as possible active business between you and your current accountant,particularly any payments.

Changing your accountant is a business activity like any other, and like any other will run much more smoothly if approached in a businesslike and professional manner. A useful rule of thumb is that the end of your relationship with your accountant will probably mirror the rest of your dealings with them – if you have allowed matters to become uncontrolled then expect difficulties, while a relationship based on information sharing, openness and trust may easily be brought to a conclusion in an amicable and professional way.

If you are considering changing accountant? Why not give us a call on 0203 475 8850 , for an initial consultation.