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charging for holding money on client account

not quite as hard-nosed as it sounds

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I have a client who is about to have an investment round to raise £2m and wants to use my client account to hold all monies raised until the round is complete.

The normal transactions in my client account are about 4 income tax refunds in & out each year.

Can I charge for this (I'm ACCA)? What would be reasonable?

Has anyone done anything similar, either in terms of SEIS or holding significant client funds? Any advice?

Thanks

Replies (45)

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RLI
By lionofludesch
11th Nov 2019 15:24

Charge for your time costs, of course, but what would be your basis for charging for passing a couple of million through your account ?

Might take you a bit longer to fill in all the zeroes but, essentially, writing a cheque or making a bank transfer takes the same time for £2 as £2m.

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Replying to lionofludesch:
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By atleastisoundknowledgable...
11th Nov 2019 15:36

lionofludesch wrote:

Charge for your time costs, of course, but what would be your basis for charging for passing a couple of million through your account ?

Dunno - danger/responsibility money?

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Replying to lionofludesch:
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By johnhemming
11th Nov 2019 17:32

It depends what sort of payment system you use. Some (RBS for example) Faster Payments only allow payments of up to £50K in a day and higher amounts need to be sent via CHAPS or some other system (such as Bankline). I would expect something similar for other banks.

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Replying to johnhemming:
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By JoF
11th Nov 2019 17:42

Bankline is an app (incl desktop) by which the payment mechanisms ie Faster Payments, Bacs, CHAPS etc are sent. It is not a payment mechanism in itself. Some limits are standard, others can be applied for via your Relationship Manager.

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Bramble
By Chris.Mann
11th Nov 2019 15:37

Isn't this arrangement going to set some bells ringing, as regards AML?

I presume that your bank will be advised of the extraneous activity?

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Lisa Thomas
By Insolvency Practitioner
11th Nov 2019 15:46

Will your insurance cover these amounts?

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Replying to Insolvency Practitioner:
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By atleastisoundknowledgable...
11th Nov 2019 17:31

Insolvency Practitioner wrote:

Will your insurance cover these amounts?

Good point - I’ve emailed Hiscox to find out.

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Hallerud at Easter
By DJKL
11th Nov 2019 15:47

Are there no rules that if money over x and to be held for longer than y it must go into an account in client name after so many days?

Certainly the old Scottish Solicitor Accounts Rules had such a requirement.

I could also see a bank locking up the account and depending upon the bank would not be convinced, even if told in advance, that their systems would not trip without human input to override.

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By johnt27
11th Nov 2019 16:00

I don't know what the ACCA client money rules on this are but ICAEW have some fairly strict criteria when it comes to receiving large deposits - separate client account if holding for 30 days or more, paying interest, extra ML checks etc

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Replying to johnt27:
Lisa Thomas
By Insolvency Practitioner
11th Nov 2019 16:34

Yes I'm with ICAEW and it's a problem if you have over £10k for 30 days.

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Replying to johnt27:
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By atleastisoundknowledgable...
11th Nov 2019 17:34

johnt27 wrote:

separate client account if holding for 30 days or more

Looks like we have this for >£10k. I’ve emailed ACCA to find out what else.
Thanks

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By ireallyshouldknowthisbut
11th Nov 2019 16:09

Charge them 5% holding fee, and you will soon not have a problem of them wanting to abuse your client account.

I don't even have a client account, never seen the point of all the aggro and extra work involved in playing banker for clients.

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Replying to ireallyshouldknowthisbut:
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By geoffmw1
13th Nov 2019 18:53

there are circumstances when there is no way to avoid holding clients money under the rules. My experience tells me as an FCA now retired but previously in practice that having no facility at all for clients money wouldn't allow for an efficient practice.

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Replying to ireallyshouldknowthisbut:
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By geoffmw1
13th Nov 2019 18:53

there are circumstances when there is no way to avoid holding clients money under the rules. My experience tells me as an FCA now retired but previously in practice that having no facility at all for clients money wouldn't allow for an efficient practice.

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Replying to geoffmw1:
RLI
By lionofludesch
13th Nov 2019 19:10

geoffmw1 wrote:

there are circumstances when there is no way to avoid holding clients money under the rules. My experience tells me as an FCA now retired but previously in practice that having no facility at all for clients money wouldn't allow for an efficient practice.

Name one.

I've been in practice for 30 years and never needed to hold clients' money, nor have I seen where it would be an advantage.

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Replying to geoffmw1:
Pile of Stones
By Beach Accountancy
13th Nov 2019 19:12

I don't have a client account due to a) the hassle, and b) the need for an alternate. No client (so far) has even asked if I have one...

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By Wanderer
11th Nov 2019 17:23

Is this Investment Business Client Money?
If so be VERY careful to ensure that you are authorised to handle and you don't fall foul of FCA / ACCA rules.
Personally I wouldn't let it go through my client account.

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Replying to Wanderer:
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By atleastisoundknowledgable...
11th Nov 2019 17:32

No it’s not, but thanks.

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By Red Leader
11th Nov 2019 17:24

Blimey! Danger money?

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By Tax Dragon
11th Nov 2019 17:44

At what point does it cease being the investors' money and become the client's? Is over-subscription a possibility? How much non-client money do your insurance and institute rules permit you to handle?

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Replying to Tax Dragon:
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By atleastisoundknowledgable...
11th Nov 2019 17:51

Good points.

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By Brend201
11th Nov 2019 18:24

Different jurisdiction but similar. Our institute felt exposed due to the firm holding client funds (typically for payroll and taxes). However, we regularly had large amounts passing through. Institute regulations required us to reconcile the account frequently and have tight controls - all of which led to a significant workload. The institute also sent someone nearly every year to ensure that we were complying with the rules. We charged for the facility. If you say no, what are the alternatives?
My first inclination would be to try to get someone else to do it. If you want to facilitate the client, check with the ACCA. You should also make sure that the bank regards the account as client money and not your firm's and that you have their acknowledgement of that fact. Getting this in writing tended to be difficult with some banks.

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David Winch
By David Winch
11th Nov 2019 18:34

I don't wish to be a party pooper, but I would think (at least) twice about doing this.
Suppose the investors lose money - will they seek to claim against you? They may not be justified in doing so, but imagine the aggro in dealing with the claims!
What are the risks that some of the monies sent to your client account are proceeds of crime? Are you going to be filling in numerous Suspicious Activity Report forms?
Why does the client want to get you involved?
David

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By Red Leader
11th Nov 2019 19:21

Maybe suggest to the client that their solicitor's client a/c would be more suitable.

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Replying to Red Leader:
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By atleastisoundknowledgable...
11th Nov 2019 19:33

Red Leader wrote:

Maybe suggest to the client that their solicitor's client a/c would be more suitable.

They have an in-house solicitor.

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Replying to Red Leader:
Mike Cooper HJS
By mike_uk_1983
13th Nov 2019 10:33

I would question if it should even be in a solicitors accounts as may well fall foul of the bank transactions rule and put them in breach of their own client money rules.

Not sure why whoever is organising the funding cant hold the money. If they are doing their own funding then hold it themselves.

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By Matrix
11th Nov 2019 21:36

I thought arranging finance was an activity regulated by the FCA? Anyway, Just Say No.

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By paul.benny
12th Nov 2019 07:58

I don't see anybody saying "yes, good idea, go for it". Or even "this is how you could make it work".

That alone should tell you that it's not a good idea.

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By Vaughan Blake1
12th Nov 2019 09:15

It does beg the question 'why?'.

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RLI
By lionofludesch
12th Nov 2019 09:36

Personally, I wouldn't touch it with a bargepole.

Accountants do accounting.

Bankers do banking.

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7om
By Tom 7000
13th Nov 2019 10:49

You probably have to open a separate client account for that as its so large. You then have to give him interest

I wouldn't go anywhere near that... let the lawyers take it

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7om
By Tom 7000
13th Nov 2019 10:49

You probably have to open a separate client account for that as its so large. You then have to give him interest

I wouldn't go anywhere near that... let the lawyers take it

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By djn24
13th Nov 2019 11:08

I would never allow this amount to be banked in our client account. Just too much money and too great a risk of something going wrong.

It can't be worth the risk.

I can imagine the ACCA looking at this in depth and if you make any mistake then you'll be in big trouble.

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By atleastisoundknowledgable...
13th Nov 2019 11:55

Thanks all - I'll politely say no.

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Replying to atleastisoundknowledgable...:
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By Tax Dragon
13th Nov 2019 13:46

Seldom have I seen such agreement in any Aweb discussion.

Congratulations, you great bringer-togetherer of the people.

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Replying to Tax Dragon:
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By atleastisoundknowledgable...
13th Nov 2019 13:57

Tax Dragon wrote:

great bringer-togetherer of the people.

I think that I'll have that as my profile banner on LinkedIn

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Replying to atleastisoundknowledgable...:
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By Tax Dragon
13th Nov 2019 14:08

atlea for PM!

(I'm so fickle!)

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By David Gordon FCCA
13th Nov 2019 12:19

The issue is not whether you may charge for your services, which you may, on any basis you agree with the client
The issues are:
1)
You will have to discuss with your PI company. It may ask for a substantial extra premium to cover this.
2)
For this sort of money the bank will, if it is doing its job properly, require full information regarding the source of the money.
3)
Money Laundering Regulations will have to be strictly adhered to.
4)
When you submit your own accounts, HMRC may ask about the balance on clients account.
Its hands-off program works on an exception basis. A change in a bank balance from a few pounds to a £million or so may trigger a simple enquiry letter.
5)
Last but not least there are ACCA regulations re holding clients' money over more than a brief time period. Please read the handbook.
6)
Security is an issue. My personal bank ac was cloned Feb 2018. I lost £1,750, with no ability for a claim against the bank or anyone else.
Holding this sort of money, these days, in a business account, requires more than the average level of Digital Security.

So, really it is just not a case of paying in the cheque and forgetting about it.

So, in truth, except and unless you have a really profitable professional reason for getting involved; Politely tell you client:

You have an agreement with your bank: It does not do accounts, you do not offer bank facilities.
PS
Some of the smaller private banks may well offer services for this, at a fee, and work with you.

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By itp3e
13th Nov 2019 12:53

do not touch it with 10 bargepoles.

You do not know where the money is coming from and it may be laundered.

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Replying to itp3e:
RLI
By lionofludesch
13th Nov 2019 14:25

itp3e wrote:

do not touch it with 10 bargepoles.

That's a lot of money to be spending on bargepoles you don't intend to use.

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Lone Wolf
By Lone_Wolf
13th Nov 2019 15:50

Or... now just think about this... you agree to take the money, transfer it into an offshore account, and then disappear off to some tropical island with no extradition policy and enjoy your life.

I'm not advocating that approach, simply pointing out that it is an option...

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Replying to Lone_Wolf:
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By atleastisoundknowledgable...
13th Nov 2019 16:01

hmmmmm. Guess that would bring about a different type of stress from running a small firm!

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By louloubelle
14th Nov 2019 09:32

I wouldn't touch it with a barge pole! It screams money laundering. Why can't he use a bank?

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Replying to louloubelle:
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By Tax Dragon
14th Nov 2019 12:27

TBH it screams escrow.

I've lost count of the bargepoles that have been brought to this thread.

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By North East Accountant
15th Nov 2019 07:50

Those bells ringing are not Santa coming.... they are huge warning ones flagging up the folly of doing this.

We would be an outright NO, at the initial request, but at least you are asking the question here, hopefully before you have agreed to this.

Some of the best decisions you will ever make are when you say NO.

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