Whilst there’s no legal requirement to choose an accountant with particular specialist knowledge of your industry, it can help.
Business owners, sole traders and companies will choose their accountant based on any number of factors. Perhaps they like being able to drop in, so they go for someone local (though that’s increasingly rare, especially post COVID!).
Others simply match a firm to their budget, or go on recommendation from others. But many people do in fact choose an accountant that has plenty of knowledge in their industry.
Are there advantages to using an accountant who knows my industry?
Any good accountant will be good for your business, but someone with industry experience may offer extra insight. They’ll often be able to provide more tailored advice about particular challenges that regularly crop up in your sector.
They’re also more likely to know about any specific funding or tax allowances available for businesses like yours. For example, they might see common pitfalls affecting similar businesses, and be able to guide you away from trouble more effectively.
The construction industry is a good example
Choosing a specialist accountant for your building or construction company can save you money, as well as time and stress. Many small builders attempt to manage their tax affairs themselves, but accounting in this area can be especially complex and you could easily find yourself in hot water with HMRC.
Accountants that specialise in the financial and tax affairs of the construction industry are more likely to be able to help you with:
- Construction Industry Scheme (CIS) returns
- Other types of tax return, such as Self Assessment, alongside the specific requirements of CIS tax
- VAT advice and returns, including reverse charge VAT supplies
- Payroll (which can be particularly complex if it involves sub-contractors, employees, and company directors)
The first one in the list above, CIS, is particularly important
The CIS (Construction Industry Scheme) is a type of tax system which contractors in the construction industry use to report the pay details of any sub-contractors who work for them.
It covers a broad range of construction trades, including building works, bricklaying, roofing, plumbing, plastering and electrical works.
Any contractors, whether they’re limited companies or sole traders, working in the construction industry – however temporarily – must register for CIS in order to pay tax to HMRC. Subcontractors aren’t required to register, but they will have to fork out higher deductions from their payments if they don’t.
You might find our article about increasing your CIS tax rebate useful.
Then there’s WIP (work-in-progress)
WIP refers to the value of any work your business has completed, but not yet invoiced for. So say you have one job you’re currently working on, and it’s worth £40,000 in total. At the moment you’re half way through it, so in rough terms the WIP would be £20,000.
Sounds simple – but how on earth do you account for it?
The answer to this is not particularly straightforward and arriving at an accurate WIP figure can mean grinding through some complex calculations. You also then need to match the costs accordingly (ouch!).
Yes, a general accountant may be able to do these things for you if you’re lucky. But enlisting the services of an accountant experienced in the construction industry is by far the best way forward for minimum hassle.
The construction industry is just one example, but you can see how specialist accountants in your area of work can really make a difference.
Get an accountant who’s proactive about saving you money
The fact is that using an accountant who has experience in your field can often save you serious money. But really, it’s also much better to choose an accountant who is proactive about reviewing your tax efficiency. They’ll help you maximise the tax allowances that are available to you, and understand how to work with thresholds to avoid any double-taxation. Your accountant should always have some ideas to help you save money in your business!
How do I choose an accountant for my business?
Ask lots of questions! For example, have they previously worked with another client in your industry? Do they stay up to date with any changes to financial regulations relating to your sector? Do they understand the kinds of purchases businesses like yours make, and how you can offset them against tax?
If you’re a sole trader or consultant, can you offset a percentage of your vehicle costs, rent, utilities and other overheads that might be less obvious? What are the implications of doing so? These are all good questions to ask from the outset!
Remember: A good accountancy firm will help your company grow
It sounds slightly drastic but think of choosing an accountant like choosing a partner (sort of!). You want to feel you can really trust them and that they’ve got your back. You also need to feel comfortable that they can see what’s coming at you down the track.
After all, your accountant is going to become extremely familiar with every nook and cranny of your company’s finances. This means choosing the right one for your business is not a decision to be taken lightly.
An effective accountant will want to help you grow your company, by offering advice on practical issues and managing complex financial work on your behalf. The best ones will be a partner to your business in all but name. Choose your “partner” wisely, and you won’t go far wrong.
Find more help with accounting and finance for your London-based business in our information centre.