High Street Contractor Accountants can Damage Contractor wealth

high street contractor accountants
high street contractor accountants

High Street Contractor Accountants

We hear why hiring high street contractor accountants can cost IT contractors a lot of money. It is better to choose specialist contractor accountants than high street accountants.

Lack of Knowledge

Contract workers who take the wrong advice from high street contractor accountants could find themselves thousands of pounds out-of-pocket. This is according to a survey carried out by specialist contracting firm Freelance World.

Lack of detailed knowledge of legislation affecting freelancers and a worryingly vague attitude to the need for compliance with the legislation were just two of the findings revealed in the survey from the Aberdeen-based firm.

Contractors, who trust their financial affairs to less-than-expert advisors could find themselves faced with hefty fines from Her Majesty’s Revenue and Customs (HMRC). Their names placed on a credit blacklist warned Freelance World managing director Alasdair McGill.

Survey of Accountants

Freelance World conducted a mystery-shopper survey this month of more than a dozen general high street contractor accountants in the north-east and elsewhere in the UK. This was to find out what advice they could give to prospective contracting clients.

Alasdair McGill, said: “The poor advice some firms give to prospective clients genuinely alrams us. It is like going to a GP for treatment when you really need to see a specialist consultant. It is quite clear that many high street accountancy firms simply do not have the expertise to advise contractors on key legislation, compliance and management of their specific requirements.

Prohibited Service Offered

One accountant offered an off-the-shelf incorporation service. This is a practise that the Managed Service Companies legislation of 2007 prohibits. Another told a Freelance World researcher that they didn’t need to worry about IR35. This is the key legislation that revolutionised the contracting industry and meant contractors can be taxed as employees.

Alasdair added: “One responder told us that IR35 had died a death. That kind of advice could cost a potential client a lot of money and years of credit problems. This is because since the 2009 budget, HMRC can now place people on a tax avoiders’ blacklist for non-compliance.”

Limited Companies

Freelance World researchers found that general firms were not offering the full range of options for clients. Instead they were steering them towards choosing limited companies.

Alasdair said: “The only option these firms seemed to offer was to set up limited companies for contractors which is sometimes not the ideal option. Not one suggested options such as using an umbrella company or going PAYE. This is fundamentally against the MSC legislation, which all potential one-person limited company contractors have to consider.

Incorrect Advice from High Street Accountants

“I believe it is simply because the high street accountants plainly do not understand the legislation. As a result they are failing to give the correct advice” said Alasdair.

“What these high street accountants should be telling their prospective clients is that IR35 work should be handled by an employment law specialist who has a detailed understanding of this area of taxation. They shouldn’t be telling them that it is nothing to worry about. High Street Accountants should not be issuing advice on IR35 unless they have real experience of employment status and are confident about defending their clients in front of the tax tribunals.”

Within Scope

The survey made it apparent that none of the high street contractor accountants contacted realised that by offering a contractor targeted solution, they fall within the scope of this legislation and cannot rely on any exemptions simply because they are registered accountants.

Alasdair said: “Freelance World is also a registered accountancy firm. However, we understand that because we deal with contractors amongst our other clients we need to be fully aware of this legislation. We have undergone three third-party audits to ensure we are one of the most compliant businesses in the market.”

“Most contractors do not understand the legislation that governs them as freelancers and contractors as much as they should. That is why it is crucial they get the correct advice. The ultimate consequence is that they could end up with a huge charge from HMRC or appear on a credit blacklist.”

For a list of specialist contractor accountants click on Accountants Directory