This article is going to discuss what accountants can do for businesses and individuals. It will also briefly discuss the difference in service that Accountants can bring to the two.
The difference between an Individual and a Business in Accounting & Tax
If you’re not an accountant, it can seem quite strange to focus so heavily on the difference between an individual and a business. Limited companies, in the eyes of the law are considered separate legal entities, as if they are individual persons. If you are a sole trader then there is no separation between yourself and the business. If you are a director of a limited company or shareholder then you have a responsibility to that company, or you own a part of the company, but you are still two separate legal entities.
How Accountants can help Individuals
An accountant can help both businesses and individuals in different ways. We will first start with individuals. An individual can be helped by an accountant through effective tax planning and through financial advice, financial management. They can also help the owner clearly understand the financial implications of their financial decisions.
Helping an individual’s tax position
Let us start firstly with how an Accountant can help an Individual with tax. An Accountant will help an individual understand their tax position and help them put their unique financial situation through all of UK tax law to help find the best tax saving opportunities for them individually. This could be in areas such as property tax, inheritance tax, capital gains tax, income tax, and many other forms of tax. An accountant can help and individual structure their tax position so that their tax position is strong for succession planning. Accountants can work with lawyers to help them with the specific tax elements and implications of the Will. The Accountant may help an individual when they are selling their business, to help plan for the tax implications affecting the individual personally in terms of how they will draw money from the deal. For more advice on contact Archimedia Accounts who can help with both individuals and business accounting.
Helping an individual through financial management
Another way an accountant can help an individual is working alongside their financial advisor to help them understand the financial implications of their decisions. If they decided with a financial advisor to invest in property or investments, the accountant is an expert in financial modelling to help them understand the financial implications of these various decisions. In essence they will help them make the most profitable decisions. They can also help an individual by helping them understand their finances and by helping them understand how much money they have their various businesses, what is making the most money, where they are making the most money, where they are losing the most money, and structure all this from a tax perspective.
How Accountants help business compared with individuals
Now going on to how an accountant can help a business, the most obvious way being, compliance. Compliance activities are required by Companies House and HMRC. These include tax and reporting requirements. Firstly, let’s look at reporting requirements. These are regulated activities that the business must abide by to fulfil its legal requirements in terms of HMRC and Companies House. Most business owners do not have the experience or skill to be able to handle these compliance activities efficiently and effectively. Having an accountant helps in case of inspections from HMRC. Companies must abide by accounting standards, e.g., frs102.
The other form of compliance accountants can help businesses with is tax. The accountant will help prepare and perform the calculations of tax returns, e.g., partnership tax returns, sole trader tax returns, and company tax returns. The Accountant will help prepare this information, perform the calculations, and help submit it on time to HMRC.
How the Accountant can help businesses and individuals through Tax Planning
As well as performing these compliance Based Tasks, the Accountant will also help the business through tax planning. This is a detailed procedure in which the accountant is taking in entire business situation through UK tax law to find the largest tax saving opportunities available to the business to improve the current and future tax position. As well as saving tax now, an accountant can also help a business save tax in the upcoming 12 months, 3 years and even 5 and 10 years. They do this by assessing the business situation through tax law and then structuring the business in such a way as to capture opportunities and benefits in terms of the business’ future plans.
How an Accountant help businesses and individuals through financial management
Another way a business could be helped by an accountant is through Financial Management. An accountant, in a similar way to what we discussed earlier regarding individuals, can help a business understand the financial implications of its decisions. The business may want for example to buy property, buy assets, increase its product range, employed staff, reduce costs in certain areas, increase efficiency in certain areas etc. An accountant can perform financial modelling to help the business owner understand the financial implications of these decisions from the perspective of profit and cash. Accountants help businesses manage stock, manage Assets, manage cash, increase cash flow etc. They can also help the business improve its relationship with the bank. Additionally, they can help the business understand what is going on financially and really be the business owner’s right-hand person.
When thinking about how an accountant can help individuals or businesses is important to know the difference between an individual and a business in terms of finance and tax. An individual is a separate entity in the eyes of the law and in terms of tax. An individual’s personal tax position is linked to the business tax position, however. The employment taxes surrounding the individual link directly to the business. Employment taxes intertwine with all the various other taxes, e.g., capital gains tax and inheritance tax, just to name a few. An accountant is required to understand the business’ and the individual’s situation in order to save the most tax and to help the business and the individual makes the most money and grow.