There are some businesses that would definitely need a chartered accountant, for instance if they have a turnover high enough to require an audit or if they are an IFA and have regulatory requirements for a chartered accountant. However, this is actually a small proportion of the businesses that use accountants. Anybody can call themselves an accountant but what do the different types of accountant actually mean.
This can be anybody who prepares accounts and tax returns and charges fees for doing so. They don’t necessarily need to be qualified and may not be a member of a professional body. Be aware – if they aren’t a member of a professional body, they might not hold any professional indemnity insurance either so make sure you always check before engaging their services.
A licensed accountant must be qualified to prepare accounts and tax returns on your behalf. They will be members of a professional body, such as the AAT (The Association of Accounting Technicians). By virtue of this professional membership, they will have adequate public liability insurance, undertake continuing professional development so they are up to date with new legislation and will be regulated by guidelines relating to professional conduct and ethics. A licensed accountant will be able to undertake the normal day to day accountancy tasks such as preparing your year end accounts and submitting your tax returns. They will not be able to do auditing (which is only required by large companies) or give you specialist tax planning advice (such as where to invest your money in order to plan for the future).
A chartered accountant must have undertaken a chartered qualification and will be members of a chartered body, such as ICAEW (The Institute of Chartered Accountants in England and Wales) or ACCA (The Association of Chartered Certified Accountants). As well as the usual accounting tasks such as preparing your year end accounts and submitting your tax returns, they will usually be able to carry out audits (providing they hold an auditing certificate) and give you specialist tax planning advice.
In the majority of cases, a licensed accountant is probably the most appropriate person to carry out accountancy services for small and micro businesses. They tend to charge less than chartered accountants and most small and micro businesses do not need the extra level of specialist tax advice a chartered accountant can provide and most certainly don’t need an audit undertaking.
Be wary of entrusting your accounts to someone who isn’t either licensed or chartered as you have no safety net, such as being able to complain to a professional body, should anything go wrong. It is also unlikely that they will be keeping up to date with the continually changing legislation around accounts and tax. Both licenced and chartered accountants have to do this in order to keep their practising certificates. Generally, non-licensed/non-chartered accountants are much cheaper but there’s a reason for this as they don’t have the same kinds of overheads in order to meet the strict standards that a professional body requires.
Dotty About Accounts Ltd is licensed and regulated by the Association of Accounting Technicians (AAT) under licence no. 5551. We are also regulated by the AAT in respect of money laundering legislation.