I'm doing the books and return for someone who's wife used to look after the books. Unfortunately she couldn't take it anymore. She did a tax return which included mileage rates, fuel costs AND capital allowances, as well as drawings as wages despite this being a sole trader with no PAYE scheme (why do HMRC not pick up on these obvious anomalies!?).
In a previous return as advised by an accountant the wife who was not using any of her personal allowance set up as a self employed 'bookkeeper' and £400 a month was the bookkeeping fee paid from business to joint account. But why if bookkeepers are to be MLR registered, have the HMRC not noticed? If one is going to do this, is it best to register s/e as a 'PA' and not to take dead on or around the personal allowance so as not to arouse suspicion?
I'm just wondering about these questions and anyone's thoughts on the matter. I guess this has been happening for years, but what's HMRC's view on this? Do they crack down? What happens if they do?
Yes it is something the ICB feels very strongly on, and others on this forum judging from previous posts.
I guess really you need every business to have a qualified professional bookkeeper or accountant overview their accounts at the least, or make both the terms bookkeeper and accountant protected.
It is something I have been wondering personally, that on this forum there are many professional bookkeepers who say unqualified bookkeepers should not be allowed, yet when one registers on this forum they will quite gladly help them. I guess you can't assume, or the fact they are asking someone shows some initiative.
With regards to MLR with HMRC, I can't say much now, but watch the ICB newsletter, most of you know about the 'rant with Garry' as it has been nicknamed on this forum
A person does not have to be qualified to be able to do the job - this is a big mistake for anyone to believe this.
However, if you want peace of mind that a person doing the job is covered by legislation, insuarnce etc, then you should go for someone qualified - note this does not apply to someone working as an employee doing the job!!
I have been in the business for 20 years, only becoming qualified recently via ICB because of legislation and not because of my ability to do the job, or the request fo clients wanting me to be qualified or any other reason.
I do agree that perhaps it would be a good idea that people who take on a professional role should be qualified to do so, but I doubt this would ever be the case.
I will help anyone on this forum if they ask for it, as being qualified does not make you good at your job, I have taken the work from countless qualified accountants only to find the job they have done is terrible.
Yes that is the case, and it is something professional bodies and learning providers will have people believe.
Infact a person doing unpaid book keeping for their spouse, providing they do not do anything else, does not need to be registered under the money laundering rules.
It is true that you do not have to be qualified to do your own books or indeed even trade as a bookkeeper, but if there were to be an HMRC enquiry relating to a clients books what can an unqualified bookkeeper offer in defence. If you can prove due dilligence then there is an escape route, but without evidence of knowledge, experience or qualification there is no defence. Money laundering is just a part of due dilligence.
The choice/risk is with the individual, but if a learning provider or awarding body did not inform someone of this when they were aware of the individuals intentions then it would be seen that they had acted irresponsibly.
I'd like to just reiterate the main focus of my post. It wasn't a complaint against unqualifieds or a 'HMRC crack down' on those people. It was a query regarding the sole issue of unemployed spouses/housewives setting up self employed to 'do' their spouse's books. None of them will be set up for MLR, but surely if they are returning self assessments as 'bookkeepers', MLR is required? This is paid 'work', so the sole trader in this example who 'pays' £400 a month for 'bookkeeping' can reduce his taxable profit for the year by £4800 just through transferring the money to a joint account.
I'm not very experienced either with HMRC. So the questions from before were also asking for other people's experiences or thoughts on why HMRC don't notice these things/or do anything about them(MLR and bookkeepers earning within their PA - and the other issue at the outset about wages claimed, but without PAYE setup).
Also whether you've heard of a housewife/husband who's ever been caught.
Would you still say to a client if their spouse was u/e and not using their personal allowance, set yourself up as s/e and do the above? Is it a risk, or is it something that just happens and rarely gets pulled up? Since the people in my eg have done this for a few years they are wanting to do the same for this year... so I'm wondering it can be done.
Thanks again ladies and gents. I'm just looking from the questions to flesh the conversation out a little with your knowledge and experiences.
the spouse does need to be MLR registered unless they are employed, so even doing it for free over the kitchen table is covered. However, HMRC do give free MLR registration for this.
With regards to if I have heard of the spouse being caught, yes. The ICB is a professional witness for the industry in courts, so I have heard of quite a few, and the amounts they are being fined would make you cry :)
Originally this was a nice side affect of the MLR, to insure bookkeepers were part of a professional body, so the spouse would have to join one. However, HMRC became their own supervisory body and they do not have standards to register.
I do agree that just because you are unqualified does not make you bad, and vice versa, being qualified does not make you perfect, but it does help .
I do believe HMRC are quite 'hot' on these subjects, especially where a Ltd co is used to pay the spouse a salary, even though they do very little work!!
But I think they lost the first round of the battle, can't remember the details on that one, but I'm sure it hasn't gone away.
Haha yes John Boy, can't lie it did boost practicing members, but not as much as other bodies (ICB standards too high ).
I think mainly for me (as I know a lot of self employed tradesmen) its the support. If something does go wrong, like in most cases that go to court that the ICB is asked to get involved, the person does not do something wrong on purpose. Those without a professional body have nothing to support them, and that's a shame.
Also it would by default put more of a structure to the accountancy industry. People can call themselves a bookkeeper or accountant, and there could be a world of difference from the next.
Didn't know at all about them giving free MLR registration in that instance.
So obviously if the spouse is doing nothing, it's wrong and for them to prove they have done some work in an investigation.
If the spouse IS doing something in a small sole trader's business then as long as they are paid in line with going rates (not their full PA or close to it!), then it's an acceptable practice yes?
Back to the sole trader whos books I'm doing now; in the 1st place it was an accountant who told them to do this. Except when the sole trader asked how much he could pay his wife, the accountant said the going rate. When asked he replied £400 a month would be acceptable. Now this was ooh, 4 years back. £400 a month....!! In an investigation are we believing that the HMRC would accept this explanation for a small sole trader? (any thoughts on that?) Because from all I'm seeing, a small sole trader with 50 purchase invoices and 10 sales a month would be charged £50 most per month by most. Add on the end of year return charge and what, you're at £800 or thereabouts as the bill? Can the wife really justify taking £4800 over the year as going rate???!!
Just thought for the purpose of others reading this thread in the future I'd paste this info here:
BIM66220
" Where a deduction is claimed for payment at the commercial rate in respect of substantial duties performed at premises away from the family home it is very likely that the deduction is allowable. Conversely, where payment at a non-commercial rate is made in respect of minor services performed at the family home a deduction is unlikely to be justified. Between these two extremes there are a variety of circumstances where the conclusion turns on a detailed examination of all the facts. "
By the way thanks P for those. I know the BIM generally has the answers, it's just finding it sometimes under headings I'm not totally familar with. Ongoing learning process! Anyway, it's in my reminder calendar to read through it all!
Do accountants generally look for this situation and advise this course of action anyway, with the mind that should a HMRC query come, they'll wriggle then?
Any idea of what the fines are like in an instance of this nature?
It's interesting because some accountants I'm sure want to stick by the book, pushing it within reasonable limits. But when it comes to adding value and saving a client thousands with tax planning tricks, do many accountants push the limits and then rely on their letter writing skills later? If so the fines mustn't be that offputting!
And who gets and retains business these days by constantly bringing a client into tee-total line with HMRC's requirements? The client must have a realm of thoughts, 'I've not heard a peep from HMRC in all my years, so why do it by the book now', or 'I'll go with an accountant or bookkeeper who tickles my ears, who saves me money and who'll back me up later'.
When asked he replied £400 a month would be acceptable. Now this was ooh, 4 years back. £400 a month....!! In an investigation are we believing that the HMRC would accept this explanation for a small sole trader? (any thoughts on that?) Because from all I'm seeing, a small sole trader with 50 purchase invoices and 10 sales a month would be charged £50 most per month by most. Add on the end of year return charge and what, you're at £800 or thereabouts as the bill? Can the wife really justify taking £4800 over the year as going rate???!!
Maybe the wife was doing more than just the bookkeeping. Maybe she was doing all the paperwork - like paying the bills, banking the cheques, issuing the invoices, chasing up non payers.
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Never buy black socks from a normal shop. They shaft you every time.
Maybe the wife was doing more than just the bookkeeping. Maybe she was doing all the paperwork - like paying the bills, banking the cheques, issuing the invoices, chasing up non payers.
-- Edited by Shaun UK on Friday 19th of November 2010 06:09:46 PM
Good point. Thats somewhat why i thought that the spouse putting her business as 'Personal Assistant' would be better than 'Bookkeeper', in that it would be less likely to show up the MLR issue.
Anyway, are HMRC systems linked at all to help find anomalies of this and other nature, or are they separate meaning some things are never found out?!
-- Edited by Shaun UK on Friday 19th of November 2010 06:11:58 PM
James is very much correct, the legislation from december 2007 came in, that all accountancy service providers need to be registered before they begin trading.
It seems interesting how the accountant came to do the year end and had not spotted this!!
HMRC are there to police tax, especially avoidance and fraud. They are not really interested in prosecuting a one man business with a family member doing the books (maybe because there is not enough money to pay for a professional bookkeeper), and neither should we be interested in such an incredible waste of tax payers money.
Money Laundering was brought in as a knee jerk reaction to the so called war on terror. All it is is just another tax and red tape we all have bear. Throughout this whole period, anyone on the planet could use Paypal to send and receive money from anywhere without so much as a bus ticket as proof of identity (I know because I paid many co-workers this way instead of having to hire Brinks Mat to deliver me, my passport, my gas bills, my granny etc. to my local bank!).
Nowadays the banks are a little more relaxed about it. Natwest for example allow a transfer up to £5k without ID! So much for ML eh!
Anyway, the point is without the army of small businesses this country has proudly produced, the nation would be a hell of a lot poorer. So here's to all (honest) bookkeepers, qualified and unqualified, may you stay in business and help others to stay in business too :)
I'm not very experienced either with HMRC. So the questions from before were also asking for other people's experiences or thoughts on why HMRC don't notice these things/or do anything about them(MLR and bookkeepers earning within their PA - and the other issue at the outset about wages claimed, but without PAYE setup).
A good friend of mine is a Special Compliance Officer with HMRC, he will tell you the answers are basically staffing.
The chances of having a tax return "pulled" are very remote unless something jumps out e.g submitting an amended return.
The way he expalined how it works to me is that every tax year an "industry" is targeted and scrutinised.
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Tony
Responses are intended as outline only. Formal advice should be sort from your Institutes Technical Department or a suitably qualified Accountant.
I do believe HMRC are quite 'hot' on these subjects, especially where a Ltd co is used to pay the spouse a salary, even though they do very little work!!
But I think they lost the first round of the battle, can't remember the details on that one, but I'm sure it hasn't gone away.
P
Back in the 80s pre IR35 hubbie and I had a Ltd company. He was a civil engineering contract worker and I did book-keeping/admin. We were investigated for me being a spouse and being paid a salary and having a company car. HMRC started off trying to claim as I was a spouse I was being paid for not doing any work. However, we proved that at one point there was only me bringing money into the company as hubbie had been out of work for six months. Instead of us owing them thousands, after over two years of letters going backwards and forwards they eventually worked out they owed us a couple of hundred!!!
HMRC are there to police tax, especially avoidance and fraud. They are not really interested in prosecuting a one man business with a family member doing the books (maybe because there is not enough money to pay for a professional bookkeeper), and neither should we be interested in such an incredible waste of tax payers money.
Money Laundering was brought in as a knee jerk reaction to the so called war on terror. All it is is just another tax and red tape we all have bear. Throughout this whole period, anyone on the planet could use Paypal to send and receive money from anywhere without so much as a bus ticket as proof of identity (I know because I paid many co-workers this way instead of having to hire Brinks Mat to deliver me, my passport, my gas bills, my granny etc. to my local bank!).
Nowadays the banks are a little more relaxed about it. Natwest for example allow a transfer up to £5k without ID! So much for ML eh!
Anyway, the point is without the army of small businesses this country has proudly produced, the nation would be a hell of a lot poorer. So here's to all (honest) bookkeepers, qualified and unqualified, may you stay in business and help others to stay in business too :)
Couldn't agree more with that, I only got "qualified" in order to join a supervisory body for MLR. Prior to that although I did exams in the 1960s I was more qualified by experience.
No matter how many "laws" the government bring in they will never catch the big players nor combat terror by MLR.
The thing is, if you are a person who wants to be in the terror industry, do you really think that you are going to worry about legislation, after all, your work is illegal to start with!!
These things only hit the normal guy, who is whiter than white, as he is the easiest to catch.
The thing is, if you are a person who wants to be in the terror industry, do you really think that you are going to worry about legislation, after all, your work is illegal to start with!!
These things only hit the normal guy, who is whiter than white, as he is the easiest to catch.
P
More to the point, do terrorists employ bookkeepers?!!!
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Jenny
Responses are my opinion based on the information provided. All information should be thoroughly checked before being relied on.
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