The constantly changing UK tax landscape
One of the reasons why new accountancy software packages are risky for limited company and personal service company contractors attempting ‘do-it-yourself’ accounting is that the UK tax system is constantly shifting; not only is the tax legislation under continuous adjustment and innovation but accountancy standards themselves are also endlessly changing. Keeping up with it all is an irreducibly painstaking and time-consuming business, and it never abates.
This is why the temptation for contractors who are not operating through umbrella companies to self-administer their tax affairs in the hope of cutting accountancy costs is a high-risk gamble. Typically, as soon as the government identifies what it perceives to be a new and efficient tax collection system, it will be rapidly introduced, usually without adequate consultation with the end users of the system. This pattern consistently causes big problems, the most recent of which is Real Time Information benefits in kind.
The best advice remains this: if you’re not operating through an umbrella company, don’t be tempted by the lure of self-administrated accounting. A professional accountant will not only be fully up to speed on the latest legislation and the latest accountancy standards, he or she will also be acutely aware of your business needs and will also be continuously on the hunt for new revenue streams for your PSC/Limited company.
The alternative advice, for those who find the administrative burden of managing their tax affairs in-house onerous, is to consider the benefits of signing up with an umbrella company. Umbrella company employees are free to pursue the professional contracting work they love without having to find extra time (and extra cash) for accounting obligations.
Good, compliant umbrella services will, behind-the-scenes, use the expertise of their own in-house specialists to calculate all tax and NIC payments due on a contractor’s income. They’ll also invoice the client on the contractor’s behalf and collect payment, passing tax and NIC deductions on to the Revenue on a PAYE basis, as well as ensuring that data is reliably sent to the taxman under Real Time Information obligations. For a modest fee, a huge weight of administration will be lifted from the contractor’s shoulders, permitting him or her to concentrate on exercising their true professional skills.