Accounts for Engineering Contractors

Freelance Process Engineers (Contractors) have to prepare yearly accounts and calculate their tax liabilities.  If they work through their own limited company, they will need to complete other official documents. 

Whilst you can do most of this yourself, most contractors prefer to employ an accountant to do it for them.  This article discusses what options are available for engineers wanting to employ an accountant.  It should be noted that this article is written from a UK perspective, although many of the comments applies to other countries.

As a minimum, accountants should offer the following:

• Payroll - preparation of payslips and calculation of payroll taxes (PAYE)
• Company End of Year Financial Accounts
• Annual returns to Companies House  and the tax authorities (HMRC - e.g. P11D)

In addition, some accountants may offer other useful services.  These may include:

• Company Registered Office
• IR35 contract review
• Preparation of a Personal Tax Returns
• Advice on changes to legislation / taxation affecting engineering contractors
• Advice on allowable expenses

When choosing an accountant, the following factors are worth considering:

• Is the accountant registered with a professional body (e.g. ACCA)?
• Does the accountant experienced in handling contractors?
• Size and location (e.g. is personal service important?)
• Cost -  a fixed fee of up to £1000 per year is typical (although it will depend on the level of service offered).

 Although an accountant to do most of the work, it is important that you keep satisfactory records so that they can complete your tax returns and company accounts.  The accountant will give guidance on this, but typically these include:

• Expenses incurred - including mileage.
• Invoices raised
• Payslips
• Record of any other monies removed from the company (e.g. dividends)