A lot of renewable energy contractors work in situations where generic accounting advice does not always fit.
Does any of this sound familiar? You often work on projects hundreds of miles from home. You are running everything through a limited company and trying to decide what to take out, what to leave in, and what to put aside for tax.
None of this is unusual in the sector. Many of my clients are in similar circumstances. But it does mean your accountant needs to understand how you actually work.
For example, where you are working, how long you are expected to be there, whether the workplace is temporary, and what other income you have during the tax year can all affect the advice you should receive.
That is where problems often start if your accountant gives generic advice without asking enough questions.
Generic advice can be expensive
There are some common “rules” I hear fellow accountants repeat a lot: “Take a salary of X to minimise your tax.” “Claim X, but do not claim Y.” “Put Y through the company, but do not put Z through it.”
This is not to criticise other accountants. Very often, that advice is right, and I would give the same advice myself. Sometimes, however, it is not. And that is the problem I see more than any other with new clients. They have been given advice based on what usually works, rather than what works for them specifically.
This was highlighted to me recently by two renewable energy clients.
Case study: £7,000 saved in one year – why speaking to your accountant still matters
A new client in the renewable energy sector came to me after becoming frustrated by the lack of communication from his previous accountant.
He had been advised to take a salary of £12,570 because it was supposedly the most tax-efficient option. That may have been fine in many cases, but in his case, it was wrong.
He had already earned around £120,000 during the tax year from other sources and had personal savings available. Taking an additional salary created an unnecessary tax cost.
After reviewing his specific circumstances, the best approach for the remainder of that tax year was to take no further salary and review things again at the start of the next tax year.
That change saved him around £7,000 in year one.
You can read the full case study here: Case study: £7,000 saved in one year – why speaking to your accountant still matters
Case study: A potential £8,500 mistake when working away from home
Another new client worked in the renewable energy sector and was based on a temporary project site roughly 300 miles from home. To avoid a 600-mile daily round trip, she rented a flat near the site during the working week.
Her previous accountant had told her the accommodation costs were not tax deductible.
After reviewing the situation, I advised her that the temporary workplace rules needed to be considered properly, and that the accommodation costs could potentially qualify for tax relief.
Had she followed the original advice, it could have cost her around £8,500 per year unnecessarily!
You can read the full case study here: Case study: A potential £8,500 mistake when working away from home
What a specialist renewable energy accountant should be looking at
A good accountant should ask proper questions before giving advice.
For contractors like you, that usually means understanding where you are working, how long the project is expected to last, how you are being paid, whether you have other income, what costs you are paying personally, and what you want to do next.
Because those things might affect:
- salary and dividend planning
- travel costs
- accommodation costs
- mileage claims
- VAT
- timing of income and expenses
- and more
When should you speak to your accountant?
It is worth speaking to your accountant any time something changes. That could be a new contract, a different project location, a long period working away from home, a big increase in income, a gap between contracts, a new company vehicle, equipment purchases, or a change in your personal plans.
It does not need to be a long meeting every time. Often, a brief telephone conversation is enough to check whether anything needs to be handled differently.
The important thing is that your accountant knows what is happening before decisions are made, not months later when some of your options may already have been missed.
A good accountant should be able to explain the advice
Something I was taught very early on in my career is that I should welcome sincere questions from clients. So don’t be afraid to ask questions if something does not quite feel right.
If you are told something is not allowable, ask why. If you are told to take a certain salary, ask how that figure has been worked out. And if you are told you cannot claim accommodation or travel costs, ask which rules apply.
And if your accountant cannot explain it clearly, or they do not know enough about your work to give a confident answer, it may be time to have your position reviewed.
Get in touch
If you work in the renewable energy sector and you are not sure whether your current accountant fully understands your situation, it may be worth having a conversation.
Feel free to give me a call on 07866 465 223 or email martin@mcaccounting.co.uk if you’d like my help.