I have a new client, sole trader who has been in business for years. He has an accountant who he is trying to move away from, because he thinks he's a bit dodgy.
So, my client has stated that over the years he has transferred £500 into his personal account from his business account each month. His accountant has then always put this down as expenses and told him to keep the receipts whenever he has used this £500, 'just in case'. The money is generally used for household expenses, bills, food shopping etc.
I pointed out that this should really be put down as drawings, but the client stated if he does this then he would have to pay tax on it when it came to his self assessment, which of course is true. But, my question is, shouldn't that have been happening anyway??
Thanks Michelle, I haven't seen last years accounts yet, I will be going back on 5th August and will ask in advance to see the previous years accounts. The other problem is the accountant always seems to be about a year behind on the accounts, tells the client to ignore letters from HMRC (needless to say lots of fines)!
I do get the impression that as long as I can justify to the client that the correct way is to class it as drawings then he will accept that. If he doesn't then I will have to walk away as I will not be doing anything dodgy! I like to sleep at night.
I would personally be getting the professional clearance letter off to the accountant as soon as you can. It would be interesting to see what the accountant does. Whether they will release the information, whether they would give professional clearance etc.
