Bookkeeping service under another company

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Londina
Londina Registered Posts: 814 Epic contributor 🐘
Complicate question: a friend of mine wants to offer bookkeeping service under the consultancy company of his brother, but how he would get paid since he's not an employee or director of the company? Does he have to become one of the two?

Can you generally offer accounting service as division of another company? Is it possible?

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  • A-Vic
    A-Vic Registered Posts: 6,970 Beyond epic contributor 🧙‍♂️
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    Londina wrote: »
    Complicate question: a friend of mine wants to offer bookkeeping service under the consultancy company of his brother, but how he would get paid since he's not an employee or director of the company? Does he have to become one of the two?

    Can you generally offer accounting service as division of another company? Is it possible?

    Sorry just to clarfy

    He isnt employed by the company (i.e PAYE) He does work for his brothers company going out to do bookeeping for his brothers clients?

    And he doesnt have a company of his own? and does he invoice his brother for the services?

    If this is the case he would have to be registered self employed ! or his brother will have to put him on the books as PAYE
  • NeilH
    NeilH Registered Posts: 553 Epic contributor 🐘
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    Hi

    He could invoice his borther's company for the work he carries out under their name, as if he is carrying out the work as their sub-contractor.

    However, if all of his work/clients are "through" his brothers company, HMRC may see him as an employee of said company regardless of his contractual relationship with them. In this instance they would seek to tax him and "NIC" the brother's company accordingly.

    Neil
  • Londina
    Londina Registered Posts: 814 Epic contributor 🐘
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    Basically he wants to use his brother's company to provide bookkeeping services and not be a sole trader, but then if he has to invoice the company for his work, he becomes a self employed, not? I knew this situation will not make sense!

    As a result, I think he has three only choices:
    -become a self employed, or
    -an employee of the company or
    -a director of the company (so it gets paid by dividends?)
  • NeilH
    NeilH Registered Posts: 553 Epic contributor 🐘
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    Hi

    In effect he would be a subcontractor of his brother's company and they would be his only client (the businesses he performs work for would be clients of his brother's company). Since he would have only the one client and only undertake work for them, HMRC may see the relationship as one of employer-employee rather than your friend being self employed.

    Of course there are other factors to consider, such as what control he has over where and when he carries out the work, these would also have a bearing on whether HMRC would come down on the employee or self-employed side of the fence, but it is something that needs to be considered.

    Neil
  • Londina
    Londina Registered Posts: 814 Epic contributor 🐘
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    many thanks for the replies, I found this situation quite interesting and wanted to know if it was generally accepted or not
  • A-Vic
    A-Vic Registered Posts: 6,970 Beyond epic contributor 🧙‍♂️
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    the three choices were correct but HMRC will want paying tax from any earnings earned.

    Subcontractor - Pain for the company as monthly returns (cis need to register company as contractor, brother and contractee) and needs to register as s/t and produce tax return but no tax to pay as deducted at source.

    Employer - register (if not already) as an employer deductions

    Director - also needs to register for UTR and do tax returns for diviends. (if a share holder)

    My thoughts is become employee a heck of a lot easier (might get blasted but just my thoughts)
  • burg
    burg Registered, Moderator Posts: 1,441 mod
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    Just to note that by becoming a director will not mean he will get dividends. He would need to be a shareholder to receive dividends.

    Why can't he be an employee and be paid the same rate as what the company charges for the bookkeeping work?
    Regards,

    Burg
  • deanshepherd
    deanshepherd Registered Posts: 1,809 Beyond epic contributor 🧙‍♂️
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    A-Vic wrote: »
    Subcontractor - Pain for the company as monthly returns (cis need to register company as contractor, brother and contractee)

    CIS is only for construction industry.

    If he wants to use a company as a trading medium why does he not just set up his own?
  • Londina
    Londina Registered Posts: 814 Epic contributor 🐘
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    CIS is only for construction industry.

    If he wants to use a company as a trading medium why does he not just set up his own?

    because it's cheaper to use someone else company which have already regular overheards, register office, insurance, VAT number, etc...
  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
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    I don't think a bookkeeping service will have any IR35 implications (though it's still worth bearing in mind).

    Thing is, it's just too complicated and not tax efficient to do it through someone else's company. Why doesn't he want to be a sole trader?

    He should go speak to an accountant who can advise him from his specific circumstances. I can honestly see the proposed arrangement being far more trouble than its worth.
  • A-Vic
    A-Vic Registered Posts: 6,970 Beyond epic contributor 🧙‍♂️
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    lol nice plug
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