I am after a bit of understanding with a situation my client is in. I am completely baffled.
Basically, I picked up a new self-employed client a few weeks ago, let’s call him Mr C. Client does some work for someone else, let’s call them Mr S. Once work has been completed, Mr S pays Mr C for the work he has done but he pays out double and then requests that Mr C pays half back. So if he works £500, Mr S will pay out £1,000 and then Mr C pays £500 back to Mr S (Either that day or 1-2 days later).
My client says that this happens every time he does work for him. He has spoken with others who also do work for Mr S and they say the exact same thing happens with them.
I asked my client if he gave an explanation for this and he said that it was explained but he didn’t understand the jargon but said accountant of Mr S said it was to do with a loop hole. My client didn’t seem to be bothered as long as he wasn’t being underpaid.
I have asked a few other accountants and they did not understand the reason behind this way of being paid. All thought the same that potentially fraud is being committed somewhere.
Has anyone come across this before?