If a sole trader doesn't repay their bounce back loan then they presumably risk their personal assets.
Those with Ltd Companies - I have spoken to a bank who seem to think that the government will expect them to jump through hoops first to collect the loan before relying on the guarantee. Presumably this means enforcing the DLA?
I have now signed up the husband as a client. All PII and engagement letter is in place
He has employment income £20k per annum and nothing else to go on his tax return. [Please don't open up any distraction around the requirement to do a tax return or whether I am charging the correct amount of fees as this is not relevant to my post]
The only other potential thing to add to his tax return is some labour he did for his wife who owns a rental property. She paid him £500 for doing end of tenancy work which was commercially valued at £500.
I believe that this is covered under the trading allowance and no tax falls due. Unless there is any restriction around connected parties. I wonder if others agree.
The industry is the 'accountancy industry'...it's bizarely off point but here is a typical scenario....
Individual visits accountant as they have some income assessable to tax. They also state that their wife or husband also receives a small income and asks whether their spouse is liable to tax. Rather than send them away and suggest to them that it is a strange question and 'why isn't their spouse getting separate advice', I put myself in their shoes and decide to be their family accountant who will hopefully act for both.
Anyway, lets park that scenario (and hopefully you will?)
If, as a property owner (AST), the client needs to do some end of tenancy work (cleaning, mending, fetching and carrying) but doesn't have the time then yes, they will need someone to do it for a fee. That is why I don't doubt that it is allowable - as my question alluded to.
The reason I ask for a second opinion is it is open to abuse and I haven't seen the usual cowboy accountants telling everyone with property income to pay their spouse, son, dog and grandad £1000 each for labour.
Obviously in that scenario it doesn't work for me. But I've come across the odd one man band who employs a spouse who clearly doesn't do any work for the business and has no other income.
There are some restrictions that are in place when it comes to connected parties (i.e. Employment Allowance, trivial benefits etc etc), but I have never heard of one in respect of the trading allowance.
I am making the assumption that there are none and came here for someone to challenge my assessment. But to answer your question again - yes, my client would have paid a suitably qualified person the same £500.
For the benefit of the tape, I have not edited my original question.
"Client has treated it as an allowable expense....I am assuming this is fine as I cannot see any restrictions. Does anyone disagree?"
As for acting for family members. It's quite common in my industry when acting for a client that pays family members to ask for advice on the tax treatment on them too. Employed individuals don't have an accountant to act for them when receiving a small income.
The only time when NMW is relevant is if the employee is continuing to do some training i.e. an apprentice.
However it is far more likely that the furlough payment more than covers the few hours that they are required to do. Despite this I have a client who is insisting they have to top up their wage for the hours of traning done x20% of NMW. This isn't the case but as it adds up to £2.50 I'm letting it go.
That's not going to be a game changer for us. If the payslip hasn't already separately identified the furlough and top up element then it's the same calculation you would have done when employer determined how they were paying furloughed staff.
It's a copy and paste as the data they have said you need is also on the payroll system. Obviously it depends on your software but with Bright pay for example you can add columns.
If it won't calc 80% then I will export to excel and add this column. It's not beyond the capability of an accountant.
The biggest problem will come from those clients that have never been succesfully registered as agents. In most cases this is because HMRC do not have their current address and this probably needs a call to HMRC to update. The lead time to sort this is already longer than the 4 working days before the portal opens and typically it will be those clients that need the money the most that will be affected.
However other than that, there is no need to go resubmitting any payrolls. Copy and paste the name, NI number, wage, pension and ERS NIC from your employer summary per employee into the portal - hopefully it will calculate 80% of that automatically(?) and cap at £2.5k.
I'm hoping it's a pretty basic process. Obviously it is extra time that you didn't plan for but it should be basic data entry for someone. We have created a new item in payroll for furloughed workers and hope that will make the process easier.
My answers
No that's not correct.
If a sole trader doesn't repay their bounce back loan then they presumably risk their personal assets.
Those with Ltd Companies - I have spoken to a bank who seem to think that the government will expect them to jump through hoops first to collect the loan before relying on the guarantee. Presumably this means enforcing the DLA?
I have now signed up the husband as a client. All PII and engagement letter is in place
He has employment income £20k per annum and nothing else to go on his tax return. [Please don't open up any distraction around the requirement to do a tax return or whether I am charging the correct amount of fees as this is not relevant to my post]
The only other potential thing to add to his tax return is some labour he did for his wife who owns a rental property. She paid him £500 for doing end of tenancy work which was commercially valued at £500.
I believe that this is covered under the trading allowance and no tax falls due. Unless there is any restriction around connected parties. I wonder if others agree.
The industry is the 'accountancy industry'...it's bizarely off point but here is a typical scenario....
Individual visits accountant as they have some income assessable to tax. They also state that their wife or husband also receives a small income and asks whether their spouse is liable to tax. Rather than send them away and suggest to them that it is a strange question and 'why isn't their spouse getting separate advice', I put myself in their shoes and decide to be their family accountant who will hopefully act for both.
Anyway, lets park that scenario (and hopefully you will?)
If, as a property owner (AST), the client needs to do some end of tenancy work (cleaning, mending, fetching and carrying) but doesn't have the time then yes, they will need someone to do it for a fee. That is why I don't doubt that it is allowable - as my question alluded to.
The reason I ask for a second opinion is it is open to abuse and I haven't seen the usual cowboy accountants telling everyone with property income to pay their spouse, son, dog and grandad £1000 each for labour.
Obviously in that scenario it doesn't work for me. But I've come across the odd one man band who employs a spouse who clearly doesn't do any work for the business and has no other income.
There are some restrictions that are in place when it comes to connected parties (i.e. Employment Allowance, trivial benefits etc etc), but I have never heard of one in respect of the trading allowance.
I am making the assumption that there are none and came here for someone to challenge my assessment. But to answer your question again - yes, my client would have paid a suitably qualified person the same £500.
For the benefit of the tape, I have not edited my original question.
"Client has treated it as an allowable expense....I am assuming this is fine as I cannot see any restrictions. Does anyone disagree?"
As for acting for family members. It's quite common in my industry when acting for a client that pays family members to ask for advice on the tax treatment on them too. Employed individuals don't have an accountant to act for them when receiving a small income.
But thanks for your interest in my question.
The only time when NMW is relevant is if the employee is continuing to do some training i.e. an apprentice.
However it is far more likely that the furlough payment more than covers the few hours that they are required to do. Despite this I have a client who is insisting they have to top up their wage for the hours of traning done x20% of NMW. This isn't the case but as it adds up to £2.50 I'm letting it go.
I would fully expect them to tally your answer to the PAYE records that they hold.
That's not going to be a game changer for us. If the payslip hasn't already separately identified the furlough and top up element then it's the same calculation you would have done when employer determined how they were paying furloughed staff.
It's a copy and paste as the data they have said you need is also on the payroll system. Obviously it depends on your software but with Bright pay for example you can add columns.
If it won't calc 80% then I will export to excel and add this column. It's not beyond the capability of an accountant.
The biggest problem will come from those clients that have never been succesfully registered as agents. In most cases this is because HMRC do not have their current address and this probably needs a call to HMRC to update. The lead time to sort this is already longer than the 4 working days before the portal opens and typically it will be those clients that need the money the most that will be affected.
However other than that, there is no need to go resubmitting any payrolls. Copy and paste the name, NI number, wage, pension and ERS NIC from your employer summary per employee into the portal - hopefully it will calculate 80% of that automatically(?) and cap at £2.5k.
I'm hoping it's a pretty basic process. Obviously it is extra time that you didn't plan for but it should be basic data entry for someone. We have created a new item in payroll for furloughed workers and hope that will make the process easier.