Share this content
25

Director has been using employees for personal use

Didn't find your answer?

I work for a limited company where the director occasionally uses employees for his sole trader business. The employees wages are then paid through the limited company. How would I account for the personal use of the employees?

Replies (25)

Please login or register to join the discussion.

avatar
By the_drookit_dug
31st Jul 2019 23:21

Unless the use of the employees is a trivial amount, I'd recharge the employee costs to the sole trader business, ensuring that VAT is accounted for unless there is a paymaster scenario.

Otherwise the director is being provided with a benefit in kind from the company equal to the cost of the use of the employees in the sole trader business.

Thanks (1)
Replying to the_drookit_dug:
avatar
By Tax Dragon
01st Aug 2019 06:08

Does that involve rewriting history?

Thanks (0)
Replying to Tax Dragon:
avatar
By atleastisoundknowledgable...
01st Aug 2019 08:17

Tax Dragon wrote:

Does that involve rewriting history?

No, just making a belated recharge. Have you never billed / been billed for something a bit later than you should have done?

Thanks (1)
Replying to atleastisoundknowledgable...:
avatar
By Tax Dragon
01st Aug 2019 09:03

Sure - but not for stuff I wasn't expecting to pay/be paid for.

Is this a belated bill, or a backdated contract? (And doesn't the director get a say?)

Thanks (0)
Replying to Tax Dragon:
avatar
By justsotax
01st Aug 2019 09:13

its not so much rewriting history, but rewriting fact. The accounts are wrongly stated? so they need correcting....?

Thanks (0)
Replying to justsotax:
avatar
By Tax Dragon
01st Aug 2019 09:23

How do you know what the agreement was?

How do you know what mark-up the company makes?

And... this is a supply (billed – apparently by the decision of the accountant, having consulted with Aweb, not by the company – late): the VAT tax point was at the time of supply.

Thanks (0)
Replying to Tax Dragon:
avatar
By Justin Bryant
01st Aug 2019 09:57

I feel one of your famous fraud allegations coming on...

Take note of para 31 here re extreme care needed when alleging fraud.

http://financeandtax.decisions.tribunals.gov.uk/judgmentfiles/j11189/TC0...

Thanks (1)
Replying to Justin Bryant:
avatar
By Tax Dragon
01st Aug 2019 10:06

You've spotted a mortgage? Mind you, you do have a track record of seeing things that aren't there.

But I'm genuinely curious (and have been for a while). We get lots of these "how would you account for…?" questions and very often the advice of Awebbers is "I'd put it to DLA" or similar. Does no one ever consult with the company/individuals in question? I thought accounts were supposed to be a record of what had happened. Folk in here seem to move other peoples money about at the drop of an apostrophe.

This particular case seems a bit more extreme than some (and the VAT issue can't be ignored in the interests of rewriting – sorry, I mean reaccounting for – what happened), hence my query now.

Who advises on/does the sole trade accounts (and VAT)?

Thanks (2)
Replying to Tax Dragon:
avatar
By the_drookit_dug
01st Aug 2019 10:29

Point taken regarding historic transactions, but for ongoing use of employees in the sole trade they should be looking to recharge, subject to VAT considerations.

This would of course require discussion with the director(s) - I would never suggest otherwise. My response represented my thoughts on the options for dealing with such a recurring scenario, not from the point of view of someone pulling together accounts months after the event (hence "is being provided with" rather than "was provided with"). Perhaps more precise language is required.

Thanks (1)
Replying to the_drookit_dug:
avatar
By Tax Dragon
01st Aug 2019 10:28

So how would you account for the past?

If you're answering a different question to that posed, you could say. (I make that comment for your future reference, not as criticism of your past contributions.)

Thanks (0)
Replying to the_drookit_dug:
avatar
By Tax Dragon
01st Aug 2019 10:41

You've done a Justin and edited your comment.

I take your point... I read the past tense into the question. Perhaps it wasn't there.

So the question isn't "how would I account for" (to which the answer is "according to the facts"), but "how should we structure/arrange...?"

My curiosity remains for all the other proposed rewrites - I just (perhaps) chose the wrong thread to ask my question! :)

Thanks (1)
Replying to Tax Dragon:
avatar
By justsotax
01st Aug 2019 11:47

think I may have missed your point, I did not say make it up....aren't you supposed to reflect what actually happened (or should happened and live with the consequences, penalties etc).

Or are you suggesting that having paid someone a salary but not actually issued payslips etc that you simply don't treat it as employment because you are 're-writing history'....???

Thanks (1)
Replying to justsotax:
avatar
By Tax Dragon
01st Aug 2019 12:09

You've lost me. What happened is simple: company employees carried out work (what work, we don't know) for the director's sole trade. When this was, we don't know (I see the "has been using" in the heading set my mind up to think past tense). Whether any discussions/agreement/payment occurred/was made, we have not been told. The question, though, is how to account for what happened. the_drookit_dug says his initial reply was (and was only) forward looking. So I say he hasn't answered the question. (None of us has, that I can see… but the absence of relevant facts could be a factor there.)

What "should" happen going forward may accord more with the_drookit_dug's advice, though alternatives are surely possible… such as the director continuing not to pay the company for the work done (if that's what happened before).

Thanks (0)
Replying to Tax Dragon:
avatar
By justsotax
01st Aug 2019 14:06

not sure why you are lost....I simply suggested originally that he would not be re-writing history....merely reporting what had happened.

'Has' is past tense unless I completed missed that English lesson....so all he need to do is report what 'has' happened. That's not re-writing history.

I don't need any details of when it happened for that to be correct. Report what has happened...….it is really that simple!

Thanks (0)
Replying to justsotax:
avatar
By Tax Dragon
01st Aug 2019 14:35

Your first comment was that the accounts were wrong.

Wrong in what way? Did they not show what had happened? Which bit did they not show? The payment that (we are all assuming(*)) was not made? If it wasn't made (and was not due), weren't they right not to show it?

(*) Some contributors seem instead to think that the employees were employed (and paid indirectly) by the director. That's not how I've read it. There is some confusion about the question – and the OP isn't here now to clear that confusion up. But I've long since stopped talking about the question itself (I'm tired of these lazy-arsed go-quiet OPs). My only remaining interest is in the "go straight to DLA, do not pass Go, do not collect £100" responses [acknowledging that the_drookit_dug's answer turned out not be one of those responses... even though everyone seems to have read it that way!]

Thanks (0)
Replying to Tax Dragon:
avatar
By justsotax
01st Aug 2019 14:56

It was actually a question - hence the question mark at the end.

Like you I don't know the facts...and can only work on the info provided, which suggested a service had been provided but not reflected in any respective paperwork.

I am just saying report the facts, if that means the accounts change, a P11D is required, a PAYE scheme is required then that is the right answer.....and has nothing to do with re-writing history.....

Your use of double negatives and many 'not's in that middle paragraph reminded me of the way politicians talk....just an observation.

Thanks (0)
Replying to justsotax:
avatar
By Tax Dragon
01st Aug 2019 15:03

OK, so so far I have misread the OP, the first reply and your first comment.

I've heard of reading between the lines. I've never known so much meaning fit itself between "The accounts are wrongly stated" and "?".

Time I went back to school.

Thanks (0)
Replying to Tax Dragon:
avatar
By justsotax
01st Aug 2019 15:30

and I didn't think it was that difficult to distinguish between 'reporting facts' and 're-writing history'...perhaps we both need to go back to school (perhaps not at the same time though....)

Thanks (0)
Replying to justsotax:
avatar
By justsotax
01st Aug 2019 15:32

but for clarification, generally a statement doesn't end with a question mark....but hey WTF do I know.

Thanks (0)
Replying to justsotax:
avatar
By Tax Dragon
01st Aug 2019 15:51

When the OP is "how should I account for...?" the response "you have done it wrong?" is, let's be kind, unhelpful.

When that (questioning) response is addressed to me, it leads (as you see) to confusion. I'm easily confused.

To be fair, I was probably confused from having (perhaps... I'm still not sure) misread the OP.

People that take different views ought to be able to sit down together. The increasing tribalism of modern society will contribute to its demise. So I think we should go to the same school at the same time.

Thanks (0)
Hallerud at Easter
By DJKL
31st Jul 2019 23:56

The headline of the post is far more racy than the actual question.

Thanks (3)
Replying to DJKL:
avatar
By atleastisoundknowledgable...
01st Aug 2019 08:16

I was hoping I could innocently ask “what did the director use them for?”

Thanks (1)
Replying to atleastisoundknowledgable...:
avatar
By Tax Dragon
01st Aug 2019 10:54

It's probably not a stupid question.

If it's working in an office typing letters, or similar, possibly not much of an issue (other than as discussed above).

It it's chopping logs, building walls or driving... would legal and insurance issues arise? Another reason to suggest a contract between supplier and suppliee… and another reason to suggest taking advice, rather than relying on us lot.

Thanks (0)
Replying to DJKL:
avatar
By Tax Dragon
01st Aug 2019 15:53

DJKL wrote:

The headline of the post is far more racy than the actual question.

More racy. Less hot (or, at least, less heated).

Thanks (0)
avatar
By LostinSuspense
01st Aug 2019 11:30

Are the employees who were used salaried/minimum hour or paid for hours worked?

If the Director has used staff to undertake other duties who would otherwise be earning fees for the main company, one could argue there is billable time that needs to be recharged. If the employees would otherwise be sat on their bums having downtime, any recharge could be argued as being less material.

Again, definitely talk to the Director and advise that he can continue carrying out this course of action but that there is a cost to it. The way to sell it is that he will pay less tax on his sole-trade business but get more profit in his limited company...

Thanks (1)
Share this content