Am I wrong or right re accountant role?

[elephantcandle]

Please help me know if I am wrong on this one.

My DH has always used an accountant for his sole trader business but the accountant just did pretty basic tax returns for him (and not a CPA). He has used this guy for years as he is a specialist in the business DH is in. DH's business has recently increased and he will be moving to a Ltd company etc next tax year so things will change but this year, he got a bit of a shock with how big his tax bill is.

Now the tax bill isn't the issue, the accountant just basically takes the bank statements and crunches the numbers and puts the return in. They never make any suggestions about how to work his business finances the best, to "trim" tax (legally and within the correct bounds etc.), to make sure he isn't overpaying and about the best way to make sure he is maximising the return for himself.

I actually do my own returns and don't use an accountant but have friends and family who do and I was under the impression that part of the role is to give advice on this sort of stuff. DH says it isn't and it isnt the accountants job to tell him how to run his business. He says it's up to the business owner to figure all that out.

So, I would appreciate knowing if IABU thinking that is part of what accountants do? Or is DH right.

He needs a new accountant. A good accountant will save you money by making you as tax efficient as possible, making sure you’re expensing everything possible.

As he’s gone ltd this is more important than ever.

I work with multiple Accountants Practices.
Some just do tax returns etc but most do more Advisory work and will show you how to save money, maximise profits and help run your business more effectively.
If he’s a LTD company there are many ways of paying all tax legally owed while still minimising this amount.
If you want to say or PM me your location I may be able to recommend someone

They may not be specialist tax advisors but they should know the basics of saving tax for a small one man company (pensions /dividends/wife ownership or employee)

They are not just form fillers -assuming they are a qualified accountant of course -people can do tax returns /prepare accounts for you without being qualified.

I work in company tax for an accountant and we do tax planning and company structure as part of the service. Maybe his is actually a bookkeeper? Anyone can call themselves an accountant tho, so maybe ask to see qualifications

I agree. It might happen only a few times a (financial) year but a good accountant should be offering to review your business and give advice on the most tax efficient ways to run the business.

Otherwise there's not much point as you can do most of the work with a XERO/Free agent/QuickBooks subscription and just pay for the year end accounts etc.

The accountant may well offer that advisory element as an extra to be paid for (but you'd probably save more than his fees).

Are you in the UK? Reason I ask is that CPA isn't a set of letters associated with accountants in the UK.

Not all accountants will be very good at the additional advice parts - setting a budget for growth etc. If you want that service, you need to get recommendations, not just stick with the current one.

There are many excellent accountants (my husband, for one), but a lot of dross pen pushers too.

The ex accountant on the board of my company doesn't even know the difference between zero base and activity based budgets. He's useless at business planning accountancy.

It totally depends on what you are paying the accountant for.

What he has sounds like a book keeper rather than an accountant.

I would definitely look around for someone else. We’ve recently moved our business from One of the old style accountants you mention to one that actually advises on tax relief etc makes a massive difference

You get what you pay for.

The accountant can't force your DH to accept accounting advice, if your DH tells them he just wants them to work out the tax and do the end of year accounts that's what they will do.

He probably does need to accept though that as his business expands he's going to have to start paying for proper advice, it sounds he has now reached a point where it's gone beyond simple money in/money out and take some drawings for yourself to live off and pay the accountant do do the tax return and end of year.

Hello 👋

The accountant’s remit and responsibilities will depend on two key things: the accountant’s own services offering (i.e. whether tax advisory is offered in addition to bookkeeping services) and the scope of work (and therefore fees payable) agreed between your husband and the accountant. What does the retainer/engagement letter your husband has with the accountant say? That should say what services are to be provided within the fee limit agreed and I suggest you look there initially and after that a conversation might be had around expansion of remit if approp.

Good luck!

Check the website and see what services are offered. Ring the accountant for a chat.

Your DH isn't wrong. I would expect my accountant to have general awareness regarding how tax can be reduced, but if your tax bill is so huge that you want to make significant savings on it, I would expect to hire a tax advisor.

Within accountancy they are 2 different roles.

He has a bookkeeper, not an accountant.

I'd expect at least a little bit of advice though, even from a bookkeeper.

My accountant sends me all the reminders for due dates, talked me through how to do my VAT returns, what bonuses I can give myself, when, what I can claim for whatever, and almost as an aside does my tax return (they also do my annual return). I do my personal tax return, but ping them if I have any questions. They also referred me to a couple of financial advisors to get pensions set up etc.

Sorry, yes I am in UK. I am not British so just used the incorrect term.

I actually do my own returns and don't use an accountant but have friends and family who do and I was under the impression that part of the role is to give advice on this sort of stuff. DH says it isn't and it isnt the accountants job to tell him how to run his business.

IS DH pushing back at you just because he doesn't want to lose face?
Because he's being ridiculous.

An accountant using every legal trick in the book to reduce your tax burden is STANDARD. Far from "telling him how to run his business" it is actually freeing him up to concentrate all his energy on his own expertise, leaving the accountant to save you money.

I would urge DH to change acountant, especially now he is going the Ltd entity route.

Our accountant tells us different ways to save tax as a Ltd Company. What the things are that we can claim for, advice about pensions etc. It sounds like your accountant is more of a bookkeeper and you need to ask if he offers advice about how you can minimise the tax paid. You can also claim for certain things if you have an office of some kind at home.

You need a proper accountant for a limited company. Your husband will no longer be self employed, he will be an employee of the company and will typically pay himself a low 'wage' and dividends on top and then most of the tax liabilities will be corporation tax rather than personal.

The company will also need to do payroll and quarterly VAT returns (if turning over more than £85k). The accountant will advise on pension contributions and what is possible to put through the company as expenses.

Just as an example, your DH should be considering whether he can take advantage of the R & D scheme. This is a Government scheme, standing for research and development and will enable a business to recoup some of its research costs.

Obviously certain conditions have to be met to use R and D.

If he's paying the accountant to simply prepare returns, then that's what you get. You want advice, you pay more.