This client I think is working through an umbrella company who say he does not need a separate company bank account. He thinks he is no longer self employed but his name still appears as this on HMRC client list. He does not understand how the system works. I am not sure whether he is being paid a wage (paid into his private bank account) otherwise it will have to be dividend.
I cannot see how I can produce statutory accounts on this basis, therefore should I turn this client away or what?
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Who is your client
Is your client an individual (and a contractor)?
If so, I think you need to go back and establish whether they are using an umbrella company.
(Usually, the whole point of using an umbrella company is that - for a fee - they deal with all the individual's PAYE, NICs, expenses, invoicing etc... so that there is no need for the individual to engage an accountant, separately)
If the individual is using an umbrella company (and you are not acting for the umbrella company), you wouldn't be expected to compile the statutory accounts for the umbrella company.
And in that scenario, the individual will not have a company bank account, the payments will just go to the individual's normal personal bank account.
Individuals working through umbrella companies are normally PAYE employees of the umbrella company and don't usually receive dividends from the umbrella company. (If they are using an umbrella company, they should normally be in receipt of payslips detailing the amounts being invoiced, NICS, PAYE and the expenses claimed against tax)
Their income might still be variable, but that is more likely to do with working variable hours on a timesheet basis and variable expenses being claimed, rather than dividend payments.
Client Lists
Not sure what's relevant about his presence on your clients list with the Revenue. That merely says what his UTR is and whether or not they'd like an SA Return. If he were to be a company director, they'd be wanting a Return too, so just having a UTR means nothing.
Umbrella Companies vary in the services they offer, so you'd have to check the specific umbrella company being used, but broadly speaking, this is what they do:
They operate PAYE for the individual contractor concerned. (The individual would be a PAYE employee of the limited company)
The umbrella co raises sales invoices (on behalf of the individual) to the third party customer in respect of that individual's work.
The point of using an Umbrella Co is that the individual would NOT have their own ltd co (thereby eliminating the need for CT600 co tax return and Ltd co accounts for Companies House altogether).
The individual may still have their own SA Tax Return to complete (and it's unlikely that the Umbrella company would do that).
The Umbrella Company would have it's own accountants looking after their accounts and tax.
eg.
Joe Bloggs (individual contractor) actually works at "Alpha Co" and uses "Brolly Co" as their Umbrella Company to take care of the paperwork.
Joe Bloggs would go to work each day and at the end of the week, would get someone at "Alpha Co" to sign off a timesheet.
Joe Bloggs would then submit the timesheet to "Brolly Co" together with any business expenses incurred that week.
Brolly Co would then send a sales invoice to "Alpha Co" in respect of the work done by Joe Bloggs.
Brolly Co would also calculate PAYE and expenses (incl a deduction for Brolly Co's own fees) for Joe Bloggs for the week and send a payslip to Joe Bloggs and arrange payment of the net pay into Joe Blogg's personal bank account.
At the end of the tax year, Joe Bloggs would receive a P60 and a P11d from Brolly Co.
If Joe Bloggs' contract ended before the end of the tax year, then he would receive a P45 from the Brolly Co.
(Joe Bloggs may have to complete an SA Tax Return for HMRC but since he wouldn't be running a limited company, so he wouldn't have to complete either a CT600 tax return or ltd company accounts at all. Joe Bloggs may engage an accountant to complete his personal SATR, if he chooses)
Hope this makes things clearer for you
Louise
www.figurate.co.uk
www.happyaccountant.com
Umbrella Company Employee
Yes when a contractor joins an umbrella company he/she becomes an employee of that company and are paid after deduction of national insurance and PAYE. He/she should receive a payslip/P60/P45 etc.
Share and dividends
"Yes when a contractor joins an umbrella company he/she becomes an employee of that company and are paid after deduction of national insurance and PAYE. He/she should receive a payslip/P60/P45 etc."
Usually they also have a share of a certain class in the limited company that they are an employee in so there could be dividend vouchers.