Bookkeeper or accountant?

What does a bookkeeper do?

A bookkeeper keeps your records straight while the year is happening. For a construction or trades business, that usually means:

• Recording every sale, bill and receipt, and matching them to your bank statement.
• Keeping track of who owes you money and which invoices are still unpaid.
• Working out CIS deductions, getting each subcontractor’s statement ready for you to pass on and getting the CIS return ready by the 19th of every month. How CIS works
• Doing your VAT returns, including the construction reverse charge.
• Running payroll if you have employees.

HMRC treats this as proper financial work. It describes these services as The services they provide can be recording, reviewing, analysing, calculating and reporting on financial information for other people.

What does an accountant do?

An accountant takes the finished year and turns it into the documents HMRC and Companies House need. For a limited company, GOV.UK puts it plainly: after the end of its financial year, your private limited company must prepare full (‘statutory’) annual accounts and a Company Tax Return.

Those come with their own deadlines, all counted from the end of your company’s year:

• File your annual accounts with Companies House: 9 months after your company’s financial year ends.
• Pay your Corporation Tax: 9 months and 1 day after your ‘accounting period’ for Corporation Tax ends.
• File your Company Tax Return: 12 months after your accounting period for Corporation Tax ends.

Source: GOV.UK, prepare and file annual accounts for a limited company.

A good accountant also advises on the bigger questions: how to pay yourself, whether to become a limited company, and how to plan for tax. For a sole trader, the year end job is the Self Assessment tax return.

What is the difference between a bookkeeper and an accountant?

The main difference is when they work and what for. A bookkeeper keeps the record every month; an accountant works from that record once a year and advises on tax.

The better the books, the less your accountant has to sort out before they can start on the accounts.

Do I need a bookkeeper, an accountant or both?

It depends on what your business does each month and how it is set up:

• Neither, for now: a sole trader with no subcontractors, not VAT registered, who keeps receipts in order. Look again when you register for VAT or start paying someone.
• A bookkeeper: you pay subcontractors, you are VAT registered, or both, and the monthly deadlines are what keeps slipping.
• An accountant: you are a limited company and need the year end accounts and Company Tax Return done, or you want advice on tax or how the business is set up.
• Both: a limited company that pays subcontractors. This is where most construction firms end up.

The reason is volume. A firm paying 8 subcontractors every week makes about 35 payments a month. Each one needs its CIS deduction worked out, every subcontractor needs a statement, and the return is due by the 19th. None of that can wait for the year end.

Hiring someone does not hand over the legal duty. GOV.UK tells directors: You can hire other people to manage some of these things day-to-day (for example, an accountant) but you’re still legally responsible for your company’s records, accounts and performance.

What does a bookkeeper give the accountant at year end?

A full, checked set of the year’s records, so the accountant can go straight to the accounts. For a limited company, GOV.UK says: you must keep accounting records that include:

• all money received and spent by the company, including grants and payments from coronavirus (COVID-19) support schemes
• details of assets owned by the company
• debts the company owes or is owed
• stock the company owns at the end of the financial year
• all goods bought and sold

Source: GOV.UK, company and accounting records.

On top of that, GOV.UK adds: You must also keep any other financial records, information and calculations you need to prepare and file your annual accounts and Company Tax Return. For a construction firm, that also means the year’s CIS returns and subcontractor statements, the VAT returns, and the payroll records. How long to keep business records

How much does a bookkeeper or an accountant cost?

There is no official figure for either, and we have not found an independent one, so we do not quote a market price. What you will usually see is:

• A bookkeeper charges monthly, based on how much there is to do: how many transactions and subcontractors, and whether you are VAT registered.
• An accountant usually charges a yearly fee for the accounts and tax return, plus extra for advice. Tidy records mean less work for them.

For how fees are set and what pushes them up or down, read how much a bookkeeper costs. Our own prices are published in full. What we charge