An accountant tells us the worst financial contractor mistakes that they regularly make. So, be warned. Do not make any of these.
1) Spending VAT or tax money – easily overcome by putting away a set
amount or percentage each month.
2) Not contacting an accountant at the outset – can leave a contractor
in all sorts of problems and often relate to item 1 above.
3) Not having their contract read over – IR35 is still around, so this is
4) Paying too much for accountancy services – there are still IT
contractors that are paying over £1,000 per year for the same service as
a contractor specialist who would charge about £50 per month.
Completing Tax Returns (Contractor Mistakes)
5) Completing tax returns (personal & company) themselves – this should
be included in your accountancy fees.
6) Weighing up which is best in their own circumstances between ltd co,
brolly or other routes – each contract/individual is different, so seek
advice and make up your own mind.
7) Banking facilities – each company is different and as such the
requirements for banking are different. For example, if maintaining a
balance in excess of £5k, there are those offering accounts with no
charges and a higher rate of interest.
Attention of the Authorities (Contractor Mistakes)
8) Paying minimum salaries – although can be on bad advice, is not the
way to go and will therefore attract the attention of the authorities.
9) Not sending through accounts/tax info in time – in order to prepare
figures, the information needs to be sent through in a timely manner.
So, bearing in mind that many accountants have in excess of 500 clients,
it’s very difficult to chase all outstanding books.
10) Not seeking advice – there’s nothing wrong with asking an
accountant/adviser for advice and sorting out any niggles before they
become problems. Many accountants will, therefore, provide free advice in the hope
that you’d become a client of theirs so abuse the hospitality!
Can readers think of any other contractor mistakes?
For more great advice on Tax issues for contractors click on Tax.
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