I'm new here and need some advice. I went to see a new client last week. He is a builder/decorator. Some of the really bothersome issues are given below:
1. He has a limited company (voluntarily vat registered) and also trades as self-employed USING the same name as his limited company. SO clients cannot differentiate between the sole trading business and the limited company AND both provide similar services. The sole trading arm is not vat registered.
2. Client has been self-employed for about 6 years but started the limited company last year. He said the aim was to close down the sole trading business but never got round to it and besides, most of his clients (allegedly) prefer non-vat transactions.
3. The limited company was vat registered in Oct 2011 and since then, 2 returns have been submitted for vat refunds. Whilst all purchases are put through the vat-reg limited company and most sales go through the sole-trading arm, there's been no vat payment to hmrc.
4. Client has a number of vans hired from another company (owned by the co-director) which in turn leases the vans from some finance company. Co-director also provides labourers to company from retained workforce of another company he owns. Co-director invoices company monthly for these services.
5. There's no payroll - client says he just takes money out when required.
6. All purchases are done using another company's credit card (this company is also owned by the co-director) but all related vat are put through 'my' client's ltd company. All fuel costs are put on a fuel card owned by another company (also owned by the co-director) but expensed through my client's company.
7. Client mentioned that last year, a previous company was dissolved (same name but limited shortened to ltd) with thousands expensed off to non-existent mileage costs as advised by the accountant! A van was written off in an accident so perfect as there wouldn't be a trace apparently.
It all looks quite emm messy to me. I was supposed to provide an estimate last week but I'm really not comfortable taking this guy on.
Hi, it may be revealing to write to the previous accountant asking if there are any reasons why you should not take on this case, prior to offering to do so. If there are reasons, then the problem goes away. On the other hand, you may get a better understanding.
This looks very artificial especially the contrast between 2. and 3. The client didn't get around to winding up the sole trade but he got around to receiving a couple of VAT refunds with no corresponding sales Returned. If you want to be really busy I'd make sure you've always invoiced at least a 4 figure sum in advance - and been paid. He may not want to appoint you under those terms, so the problem goes away again.
Sorry this is not any more positive for you but I'm loathe to comment on arrangements at 4, 6 and 7 which seem a total fiction. Anyway, there are much cleverer bods on here than me who might have some more helpful suggestions.
I get the impression you're aware of the artificiality too, so you'd likely be in for some fencing with the tax authorities should they catch up with him.
At the moment there I don't think there is any reporting requirement but as soon as you start working for the client, then I think you would be required to make a report.
Personally I would walk away
-- Edited by Wella on Monday 16th of April 2012 12:43:47 PM
My advice is if this is if your gut tells you to walk away, do it. So many times I've had bad feelings about clients and talked myself into taking them on. Without exception every one has turned out the be the nightmare I was scared they would be.
There are plenty of decent clients out there, let someone else take the horror cases. I know it's hard to turn away money, especially right now, but think of the stress and heartache.
As per Don and Kjm... walk away. No matter how much you want them they are not worth it! I'm despartae for clients, but theres no way on earth i would take this guy on. You would need bloody good PII if you did, as I suspect that these are sorts of people to screw you over when you've done your job proeply and they are landed with a hefty bill for VAT/FINE!! (Which they would end up with) Sounds like a lot of 'moving money about to not show true earings' which, for me wreaks of money laundering!!! :/
If you really do suspect that this is, or is a good chance of being, a money laundering situation, are you obligated, or at least think you should, report this to HMRC? What exactly does this MLR thing you sign up to mean in this situation?
1. Dont think there is anything wrong with having a sole trader and limited company with the same name. Any invoices issued will be in the business name so customer will know who from
2. Expect will be invoicing non VAT registered customers through the sole trader
3. If purchases are through the Ltd and related sales are invoiced through the sole trader then there should be a sales invoice from the ltd to the sole trader to recognise for this. Otherwise will be showing an artificial lose in the ltd company and artificial profit in the sole trader. Plus reclaiming VAT in the ltd company.
4. Nothing wrong with this provided done at arm length and any related party disclosures are shown through the ltd company
5. Wouldnt be any payroll through the sole trader. Any money taken goes to drawings. If through the ltd company and no payroll then any moneys taken would go to directors loan account which appears couldnt be cleared at year end as will be no profits if no sales invoices going through so overdrawn loan account issues at year end.
6. Costs shouldnt be going through company if paid by another companys credit card.
7. Nothing to do with you.
All in all sounds very iffy as others have said.
Would get professional clearance letter from previous accountants before taking on.
Would also ask for deposit in advance for services to be done (and be realistic about what it is likely to cost)
Thanks again Shaun :) A total of £102 isn't a bad deal. Better check out what they are offering and go do the membership thing. Do you get a discount from Arlington if I mention you referred me? Petal
-- Edited by Petal_Me on Monday 16th of April 2012 04:57:51 PM
Thank you for the prompt responses; they confirm my feelings about the matter. Curiously, when I met the guy, he was quite bullish about how many bookkeepers he still needed to have a chat with blah blah blah so I was hoping he would just go away. Well, this morning, there was an email from him asking me to please take him on and help him sort out the mess. He said the co-director - the main financier - makes all the executive decisions and the accountant answers to the co-director and his plethora of companies. He said everything done was on the advice of the accountant. I guess if I decide to take him on, he'll have to bear all the vat losses on the non-vat invoices he's been issuing on his self-employed business. I'm so torn. I think I will hear what the accountant has to say before making a final decision. Better go renew that PII asap.
Hi, as this guy is now coming across as desperate, you could offer to take on the sole trade alone and write to the accountant in just that capacity. I'd still want a thousand up front.
Also, consider advising him to resign from these other companies. There's some possibility of mitigating penalties if he can be shown to be the party coming to terms with realistic accounting/taxation and divorcing himself entirely from these arrangements as soon as he'd been to see you. Consider using one of the 'tax safe' HMRC contacts as an initial route whether or not it is strictly applicable to him :-
If it was me I'd want to have the very best advice merely taking on the sole trade. He may become a contrite client in the future. Do you know of a local accountant who can hold your hand through this and perhaps offer a consultation with you both. You may also wish to consult your professional body.
I had a client once (past tense, got rid of him), he did exactly that he had a Sole trader and then started a LTD with the advise of the 'NEW' accountant from down the pub!
It was at the stage when he told me of his NEW intentions that I walked away. His 'NEW' accountant told him to split his comany to 'AVOID' paying VAT and get a refund each quarter! I couldn't quite believe my ears so I rang the new accountant and he confirm that was what he had advised my client. The next day he was history!
Some just aren't worth it and like Don Tax says get a deposit a very large one first, as my client never paid on time either, I use to add £20 to his bill, included it in the invoice so he didn't realise what I had done and this was just phone calls to get my money each time. He was an utter joke and I have learnt my lesson and never again!
Like Kris says follow your gut instinct, what ever you do don't feel sorry for him, hes possibly got through a few bookkeepers!
Thanks again, everybody. This forum is a god-send.
Though still waiting to hear from the accountant, I'm walking away from this one. I feel too uncomfortable about it plus I don't think I can get the work done before vat submission date this month especially as he wants vat cash accounting done this time.
Re - previous comments on sole trading/Ltd, I know people can have both but if using exactly the same business name AND bank account, and mixing all materials, tools etc, how do you correctly allocate transactions when the client uses 'crazy' differentiation methods? The 'client', for instance said all non-vat purchases relate to sole-trading business. All fuel purchases (and vat) belong to the ltd company (yes, he said he randomly drives about 100 miles weekly around the local area in his heavily stenciled van) to put his name out there. All trips to 'self-employed' business' clients are on the way to the aforementioned random destinations. For a man claiming minimal knowledge of accounts, he knows a wee bit too much about vat management.
Totally unrelated... can anyone recommend an affordable PII insurer for bookkeeping/accounting work? Presently, I limit my hours to 7 hours weekly and have 4 mixed clients, 2 of whom I provide final accounting work for.
Petal_Me wrote:Totally unrelated... can anyone recommend an affordable PII insurer for bookkeeping/accounting work? Presently, I limit my hours to 7 hours weekly and have 4 mixed clients, 2 of whom I provide final accounting work for.
Try Arlington professional Risks that you can get to from the Special Offers Tab on the Green menu line above.
They're really helpful and professional and the insurance is through Zurich with a six year tail off and starts from only £78 for site members (site membership will set you back another £24 but the two together is still very cheap for quality PII.
Note that I have absolutely no link the Arlington beyond them supplying my PII.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
It's one of those things about this site though that it's not about the money (there isn't any) it's the leave no bookkeeper or accountant behind mentality of we're all in this together so we just help each other where and when we can.
Sure that you would do the same if you had some money saving advice that we were unaware of.
Bet your real glad that you found us now.
kind regards,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Just seen this one - yes, you could stand firm with him anbd tell him how things should be done, but it is very unlikely that he will conform.
I took someone on a couple of years ago who had a trail of failed companies and incompetent accountants (ding), who changed his mind about who the directors were (ding ding), but it was the new company (which I formed) being paid by debtors of one of the failed companies - which he had OK'd with the IP (!!!!) - which went ding ding ding!
Why can't I find more clients like my best client? Two years on, not a moan, not a groan. All papers ready to collect each and every time and office managers at the ready to deal with my queries. The accountant responds to my email before I press the send button. Last Christmas, the company bought me an almighty hamper. I need more of the same please.... the client, I mean.
Well they were very generous! I do get Christmas cards of a few but thats it!
I have nice clients now, but you never know what they are really like until you start going through their books and bank statements, then it gives you a feel for it and also if they are good payers!
Glad you decided to miss out on this one. Trading both as a sole trader and a ltd company in the same line of business is disaggregation (not quite sure if that's spelt correctly) and the VAT man will not take it lightly with prosecution and fines.
Thanks Semsley, my thoughts (and fear) as well. Mind you, proving quite difficult to get rid of him... sent me two emails yesterday asking me to re-consider. If anyone fancies having a go at the accounts, do contact me off-list :)
Some email systems will allow you to tailor personalised auto responses. Maybe a link through a voluntary organisation will encourage him to seek represntation elsewhere :-
http://taxaid.org.uk/guides
There are links in there somewhere to find members of the chartered sponsoring bodies.
