Choosing an accountant and agreeing fees

Choosing an accountant and agreeing fees

Only large companies and companies operating in a regulated industry or service sector are obligated to employ the services of an auditor. Small companies are not required to. The responsibility of filing annual accounts and annual confirmation statements belongs to the directors of the company. If the directors feel competent to do so, they can make those online filings themselves. Similarly, the directors are responsible for and can deal with corporation tax returns, VAT returns and the operation of a PAYE scheme to pay staff.


Notwithstanding the absence of any legal requirement to employ accountants, it is wise to do so in most cases. Here’s why:

  • Accountants stay up to date with changes in company and tax law. Most people running a business find that they are completely occupied by their business and don’t have the time to keep track of changes in legislation that are not directly related to their business.
  • Being unaware of changes in legislation can be a costly oversight as some changes can have a big effect on the business, either jeopardising its very existence or offering significant operational and cost-saving opportunities. An accountant familiar with your business will inform you of the changes and advise you on how to best deal with them or take advantage of them.
  • Running a business is usually so time consuming and immersive that business owners can lose their objectivity. Being able to consult an accountant allows a business to benefit from an independent perspective.
  • From time to time businesses run into problems or are presented with opportunities. Experienced accountants usually foresee these problems and opportunities and are equipped to advise a business on the best course of action.


Having made the decision to hire an accountant, the next decision will be which one. Four factors are commonly considered when hiring an accountancy practice:

  • LOCATION – Some people like to have access to a local accountant for ease of conducting face to face meetings. This is not so important these days because most people have access to VoIP, Skype, Facetime and WhatsApp. Furthermore, all major accountancy packages are now online, allowing accountants to access your accounts from wherever they are located.
  • SPECIALITY – Some businesses are subject to regulations set by a supervising authority such as the Law Society for solicitors and the Charity Commission for charities. These supervising bodies often
    require annual reports by independent accountants. Other businesses have very specialised requirements. Farmers, for example, have to deal with grants and subsidies on a regular basis or dentists have to deal with a mix of private and NHS patients. In case of contractors, accountants need to be familiar with the IR35 regulations and the expenses that contractors (outside IR35) can claim from their companies. There is an obvious advantage of hiring a firm of accountants who specialise in your field and are familiar with any specialised requirements.
  • SIZE OF PRACTICE – Accountancy practices come in many sizes, from large international practices with 50+ partners to sole practitioners. Smaller practices are sometimes part of larger national and international associations and have a variety of expertise to draw on when required. The variation in size is no indicator of competence or professionalism. However, in some situations, depending on the nature and circumstances of your business, it may be better to hire a larger practice. Larger practices usually have a larger staff with different specialisations and can offer more comprehensive service, if required. As a rule, larger practices tend to be more expensive than smaller practices. Most start-ups do not require large practices.
  • FEE LEVELS – Practices that are smaller and not located in large cities tend to be a little less expensive than their big city counterparts. When deciding which accountant to hire, and if you have a number of options to choose from, you should always ask for fee quotes so that you have a ground for comparison. Even if you have only seen one practice, you can always discuss the quoted fees with friends who are also in the business to get their views.

Anyone can call themselves an “accountant” or a “tax agent” as there are no legal restrictions to the usage of these terms. However, there is a list of professional accountancy bodies that regulate their members and ensure competency and security for their clients. The security is a result of the professional indemnity insurance requirement for their members so that if they make a mistake that causes loss to a client, the client can be compensated. Hence, we recommend that you hire accountancy firms who are members of one or more of the following:


To agree to the fees, you will have to agree to the services your accountant will provide. Broadly speaking the work is split into 3 categories:

  • Compliance work – This is the work that needs to be done to ensure that a company complies with its legal obligations. Most of this work is routine and does not require great expertise. Accordingly, it can be done by bookkeepers who charge much less than the large accountancy practices. The following tasks fall into this category:
    • Completing VAT returns
    • Operating a payroll for the staff and submitting monthly PAYE figures
    • Day to day bookkeeping to record the company’s transactions accurately
    • Preparation and submission of Annual Confirmation Statement
    • Management accounting
  • Compliance tasks needing professional oversight – This can be completed by competent but unqualified bookkeepers and accountants. However, except in the case of the smallest businesses, it is probably best to ask your bookkeeper to get to the first draft stage of the documents being produced and then hand it over to an accountancy practice to finalise and submit the work. The following tasks fall into this category:
    • Preparation of annual accounts and their submission to Companies House
    • Preparation and submission of corporation tax returns
    • Directors expenses and the preparation of P11ds
  • Professional work – The third category of work should only be assigned to qualified experts:
    • Corporate tax planning
    • Directors and shareholders’ personal tax planning
    • Company finance and debt structuring

When you meet with an accountancy practice to get a quotation for comparison, be sure to ask for estimates relating to each category. You may also consider asking bookkeepers for quotes, especially for the ordinary compliance work.


Accountants charge on a time and fees basis. They have fixed hourly charges for the partners and staff and charge their clients for the hours spent on a client by each partner or member of the staff . Junior and even unqualified staff may be used for most of the compliance work, while the more senior staff work on tax planning and company finances. However, you will find that even the junior and unqualified staff cost significantly more than the average local bookkeeper simply because accountancy practices have to recover all their overheads including their Professional Indemnity Insurance (PI).

The question you need to ask yourself is whether you need your basic compliance work done by someone whose fees are set at a level that recovers the overheads of a professional practice. Some accountants have addressed this problem by lowering their fees for basic compliance work, which they charge out at a fixed monthly sum. This has the additional benefit of allowing clients to budget their costs.

Even if an accountancy practice is quoting a fixed annual fee for compliance work, it is calculating fees by estimating the number of hours that will be needed each year and the grade of staff required to complete that work. There is a small risk to the accountant that they have underestimated the work required. Generally, the level of fees charged correlates to the size of the business and the number of transactions per year. These are some of the examples:

  • A freelancer or contractor – A contractor may be paid only 12 times per year and have a handful of expenses. There are very few transactions involved, and there are specialist accountants who provide contractors a comprehensive annual service for under £1,000 per year.
  • A company turning over less than £85,000 per year does not need to be VAT registered and may not have staff. Again, there will be relatively fewer transactions and the annual fees could be less than £2,000 per year, especially if the work is divided between bookkeepers and accountants.
  • A company with 50 employees may find that it is charged over £200 per month just for the operation of the payroll.

The only way to come to an agreement regarding fees with accountants and bookkeepers is to meet with them and give them the details they require and discuss how the work should be completed and by whom. Accountants are usually happy to meet with you and discuss your work. It requires a bit of time on your part, but it is always best to get several quotes. Once you have had discussions with 1 or 2 accountants, you should understand the issues that determine the level of fees quoted and how to keep your accountancy fees to a minimum.

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