What happens in real life when it comes to bills for the work you do for client company directors?
Talking with an acountant I am mentoring we got to talking about how he might charge for a new service he is offering clients - related to their personal vs business finances.
Here's my question. Would you be comfortable just billing this to the client's company AND not referencing it on his p11d? What do you do as regards the fee you charge for personal tax returns you complete for company owners/shareholders?
I know the theory of course and I know what one could do in practice to remain ethical. I am curious as to what happens in real life though.
Replies (12)
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Generally, if a omb company, I do the PAYE, charge company, do co sec and dividend statutory bits charge company, do P11d's, charge company.
We use IRIS, most of this appears automatically on directors tax return due to the fully integrated way IRIS works.
Takes a few minutes to add in bank interest, 3rd party dividends and may be a pension contribution.
I do not charge and do not put on P11d, it would take longer to do the billing than prepare the return! It would probably cost HMRC more to process than the revenue they would get from the £20 I could justify as the charge.
If directors have more complicated set-up, some have btl portfolios, I will bill them personally, and if they pay through company bank it goes on P11d.
I would also counter, if they were not a director they would not need a tax return, therefore the cost arises wholly necessarily and exclusively from their employment! HMRC insists a tax return must be completed, they can't have their cake and eat it. I fail to see why a director should be penalised for having to tell HMRC he doesn't owe them anything.
HMRC also want a level playing field between "self-employed" and self "employed", a sole trader gets relief on accounting fees after all!
I would finish by saying I have never been asked about this on any company PAYE enquiry!
I would also counter, if they were not a director they would not need a tax return, therefore the cost arises wholly necessarily and exclusively from their employment! HMRC insists a tax return must be completed, they can't have their cake and eat it.
Except as you well know, that isn't quite true, is it. The director is free to request (as often as is necessary) withdrawal of the notice to file with legislation in his corner. Whilst HMRC may choose not to withdraw, it is no less an expense of the business legally.
I charge extra and bill the Director personally. If they pay my invoice from the company then I book to DLA and adjust the VAT. If the company is meeting a personal expense then the fee should be payrolled not P11D.
There is no way I would not charge, I must have read all your blogs!
If the company is meeting a personal expense then the fee should be payrolled not P11D.
In your case, where the cost is billed personally, yes it is a payroll issue not P11D. P11D is for those whom bill the company still (hopefully billed separately to the main accs charge).
Whether there's a return or not, the directors tend to want you to make sure their personal tax is right. So there's at least some checking work to be done. Does anyone not do this as a matter of course ?
Most of the directors I deal with have simple returns - salary, benefits, dividends - and don't take long to review and complete an SA return if necessary. Some are a bit more complex. Either way, I give them a separate bill.
When we quote at the outset, we include a notional fee in respect of the directors' tax returns (usually £200 each). Our invoice will be in respect of accountancy services to the company, rather than specifying each particular area of work.
This will either go on the P11D as a benefit in kind, or be charged to the DLA in order to "make good" the cost to the company.
Not saying it's necessarily the "right" way to go about it, but that's what we do.
If there are several directors, I bill them individually, as sometimes not every director wants that service, so it can't be packaged with the company fee. Otherwise I include it in the quote to the company, and do a notional charge of £100 per year from the company to the director through the DLA.
I bill the directors individually and make it clear on my client onboarding form that this is the case - but they get it discounted, usually charge around £120 + VAT for the return as their is still time involved preparing it especially with dividend tax calculations now that we prepare along side any dividend discussions we have with them.
For my company clients I only do the personal returns re one company, that belonging to my sister and B in Law, as I do not really charge much re payroll/accounts/CT, a nominal £250 to the company. I treat the personal tax returns as done for nothing- interesting point, is the "discount" pro rata across the board or is it part re company and 100% re individuals?
Slightly different question, does everyone do distinct engagement letter for the different clients?
As we all know an individual has many hats as regards his/her company - shareholder, director, loan creditor (or debtor), sometimes same for other related companies as well.
As accountants we owe a duty of care to our clients and are responsible for our advice and actions. To minimise risk we all issue engagement letters covering the services that we are providing.
The key point is who is our client in any given circumstance.
Are we acting for the director as shareholder, the company (acting through the director) or the director as a loan creditor? Or the same for another company?
I appreciate that the lines do get blurred but if conflicts and disputes arise the only protection is what has actually happened and what we have done.
Lets hope that the engagement letter, advice and actions taken can withstand the scrutiny and haven't created a muddle leading to a problematic duty of care.
Personal tax return the director is the client.
Therefore, engagement letter and bill to them.
All work is chargeable. We give directors a discount for a pure Vanilla return ie PAYE and divs and in days past two lines of bank interest.
We charge the company - just easier to collect and put on DLA.
If the company director has more say blt he/she is billed the extra direct.