Company year end account disclosure's

Company year end account disclosure's

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We look after a client with 4 directors and multiple employees - Company A. One of the directors also has his own PSC - Company B. He, along with the other directors, sells his services through Company A. He will then invoice Company A from Company B albeit for slightly less so Company A still benefits. 

We don't look after the accounts for Company B and their accountant has sent the following request: 

“The related party transaction which I referred to was : Company B receives consultancy fees from Company A, a company in which you are a director- please let me know, after appropriate enquiry, that disclosure is made in Company A accounts and that you are aware of HMRC rules, including IR35 risk in relation to this. I will then amend as appropriate before filing”

I have not had this request before, any help? Should there be additional disclosure's in the accounts that cover this arrangement? 

Replies (9)

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Euan's picture
By Euan MacLennan
18th Aug 2016 11:03

As you appear to be a director in Company A, the appropriate enquiry would be to ask your company's accountants if the disclosures in Company A's accounts are correct.

However, Company A's accounts should include a note disclosing the name of Company B, the fact that it is related to Company A by being controlled by a director of Company A, the amount of consultancy services paid in the year and any balance outstanding at the end of the year.

I don't see the relevance of IR35 to Company A as it is Company B which is paying the worker for personal services provided to an end-client.

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Replying to Euan MacLennan:
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By User deleted
18th Aug 2016 11:11

Euan MacLennan wrote:

I don't see the relevance of IR35 to Company A as it is Company B which is paying the worker for personal services provided to an end-client.

I agree. IR35 may apply to B, but I can't see the need for disclosing that in A's accounts. Further, what business B's Accountants have in A's accounts, to the point of giving specific instructions as to the disclosures?

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paddle steamer
By DJKL
18th Aug 2016 11:06

When you say "additional" what disclosures are you already making within the related party note to Company A's accounts?

(It is the bit of our accounts I hate the most as it always feels like I am writing a novel!!!!!!)

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By johngroganjga
18th Aug 2016 11:12

I find the request from company B's accountants rather impertinent as it is none of their business what disclosures are or not made in company A's accounts.

Leaving that aside, disclosure of the transactions with company B is plainly required in company A's accounts and always has been. If that is your question you now have the answer.

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Replying to johngroganjga:
RLI
By lionofludesch
18th Aug 2016 12:49

johngroganjga wrote:
I find the request from company B's accountants rather impertinent as it is none of their business what disclosures are or not made in company A's accounts.

Indeed. I might consider reviewing the disclosures I was making in Company A's accounts but I'm not sure I'd be entering into discussions with another firm of accountants about them.

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By Wanderer
18th Aug 2016 11:24

Possibly related party disclosure in both company's accounts?

Not really sure why company B's accountant is concerned about company A's accounts disclosure?

& surely company B's accountant should be advising about company B's IR35 risk?

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paddle steamer
By DJKL
18th Aug 2016 13:56

.

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By Fotek
18th Aug 2016 16:17

Thanks for the responses. We understand the need to include disclosure's about related party transactions in the full accounts. However, from what we understand and have been told by our accountants, these disclosure's are not included in the abbreviated accounts? (they can be voluntarily included though)

It was the mention of IR35 that was confusing.

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Replying to Fotek:
By johngroganjga
18th Aug 2016 17:12

In your first post you were the accountants to company A. Now you ARE company A, as you refer to its accountants in the third person.

What is going on?

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