In every walk of life, there are specialists; people who have expertise in a niche area rather than just a smattering of general knowledge. For example, a GP could diagnose a headache, but would not necessarily be any good at brain surgery; a world class defender doesn’t automatically make him a good goalkeeper, and a general practice lawyer might make a real hash of a mergers and acquisitions deal.
This is very much the case in accountancy, especially when it comes to understanding the real needs and specific benefits for contractors and freelancers. Here are a few of the areas where using a specialist contractor’s accountant can add real benefit:
VAT planning: Small to medium size businesses will want to choose between cash accounting or standard accounting for VAT and will be keen to control its impact on cashflow. For most contractors, however, the flat rate scheme will be far more preferable.
Growing a business: Modern ‘business growth’ accountants will help companies develop strategies to get new customers and grow their business. Contractors simply need help negotiating better rates, securing new contracts and keeping their CV and LinkedIn accounts up to date.
Systems and procedures: Companies that employ staff to undertake different functions and roles within the business depend on systems and procedures to keep them operational. Freelancers and contractors tend to manage everything themselves and perhaps only outsource things like bookkeeping and accounting.
Handbooks and HR: Staff require management and terms of employment to protect both them and the businesses that employ them. Contractors need to be self-managing and responsible for their own work.
Expenses and benefits: Anyone who is employed by a company is entitled to benefits such as holidays and sick pay, and some staff may even generate expenses or other costs in the course of their work. In a small business, the employees simply fill in a form or put in a claim to get these benefits. This is a hugely important area for contractors and can make a significant difference to their personal income. Not being able to claim statutory sick pay, holiday pay, maternity pay, redundancy or a company pension; a contractor needs to manage their expense account shrewdly. Finding the most tax efficient way to draw cash from their business is a key area of expertise for a specialist contractors’ accountant.
Remuneration planning: Because contractors DON’T receive the benefits listed above (like holiday pay) it’s vital that you receive the maximum financial benefit from contracting. Think of this as recompense for the risks you take by being in business for yourselves! Make sure you are paying yourself tax efficiently, using different share classes and utilising your spouse’s personal allowance and dividend tax allowance.
Travel expenses: As with other expenses, an employee of a company would simply fill in a form to claim back travel costs. Contractors need to be aware of things like the ’24-month rule’ which covers temporary work placement conditions and determines when a claim can or can’t be made.
Legislation: Understanding any financial legislation that needs to be complied with is important for any small or medium size business. For a contractor, it can be a ‘make or break’ issue. Government enforced rules such as IR35, managed service company legislation, and the new rules on travel and subsistence (if you are a contractor for Public Sector organisations) can make a significant difference.
Working premises: Businesses may look to purchase or rent an office or workshop from which to run their operation. Contractors tend to work in their client’s offices or even from a home office. There are various ‘use of home’ benefits and tax efficiencies available for contractors which a specialist accountant can help them to identify and claim.
If you are a contractor or you know someone who is, and you would like to find out if you are getting the very best advice from a specialist – why not get in touch for a free review.