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What is a contractor accountant?

A contractor accountant specialises in doing the accounts for freelance workers. In many cases, these employees are referred to as contractors rather than freelancers.

They are people who are employed by a company to complete a specific task. Once that task is done, normally, they move on and find another job. This will usually be with another company, although in some cases they will start work in a new project for the same company.

Why do firms employ contractors?

In the UK, they represent a growing segment of the working population. This is because most UK companies want to keep their regular overheads to an absolute minimum. Employing contractors whenever possible really helps with this, because it keeps the wage bill as low as possible. It also makes it easy for a company to maintain as flexible a workforce as possible.

Do you need to use a contractor accountant?

If you work as a contractor or freelancer, the chances are you need the services of a contractor accountant. As a basic rule of thumb, if you pay your own tax and national insurance contributions, you are considered as either self-employed or as a contractor.

In theory, you can complete your own tax return and pay the necessary tax and NI contributions. Prior to 2000, this was not a difficult task for most freelance workers.

However, in 2000, the government introduced a piece of legislation known as IR35. These new rules made things a bit more complicated for the self-employed.

IR35 sought to uncover those people who were working as ‘disguised employees’. These people were usually paying less tax.

Disguised employees are people who work for the same firm year after year, doing the same job, taking holidays etc., but claiming to be self-employed contractors. These people and the employer pay far less tax.

Naturally, the UK government wanted to stop this from happening. Unfortunately, this legislation makes it very hard for genuine contractors to avoid being considered as an employee and having to pay more income tax as a result. This leaves them open to prosecution if they misunderstand the rules and fail to pay the right level of tax.

As a result, it is now far wiser to find a good contractor accountant to complete your tax return and to help you to avoid signing new contracts that make you liable to pay more tax. Hiring an accountant with the right experience will give you peace of mind, and help to keep you on the right side of the taxman.

Posted by Mark
December 30, 2015
Accounts

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