Validity of expenses

KaelaH

I am currently working on a clients accounts and am beginning to question a few of his expenses.
He is in the marketing industry so relies heavily on computer equipment etc however I am beginning to wonder whether the purchase of 2 brand new Iphone 4S's & an Ipad 2 (at full market value) as well as various other computer equipment is really necessary. One of the Iphone's is for his wife who, although a director, i'm not aware that she actually works in the business at all.
I have two queries, he's validating the expenditure by saying its for app testing! I can justify one for him as he's the one working in the business all the time and no doubt has a large percentage of use for business. However, the phone for the other, inactive director, and an Ipad - how am i best to deal with this?
Secondly, if the spouse doesn't work in the business is it right that she's claiming the obligitory salary and dividend payments?
If he's telling me that the expenditure is genuinly for his business am I entitled to believe this or am I obligated to delve further and maybe disallow certain costs?

burg

As for the purchase of equipment this can be difficult to prove. I have a laptop, pc, server and an ipad which may seem excessive but I use all of them for business.

This can be a difficult area. I would state that he needs to watch he expensives don't attract attention but leave it at that. If you don't think they are legit then that is different.

As for paying his wife who does not perform any duties then you need to warn him of the consequences. If she can perform some duties and be paid for them then this will get around it.

mini_schnauzer

My husband designs and develops Apps and yes you need alot of Apple devices (iPhone, iPod Touch, iPad, iMac) of varying age each with different iOS platforms on to ensure they work across the range. Same will go for developing Android Apps, the need for Android phones etc. They are the tools of their trade. Perhaps ask him what he uses them all for and find out more about his business before you judge so quickly.

KaelaH

Thanks for your comments, I really don't mean to come across as if I'm judging him, I really just want to make sure that if he's telling me they're legitimate purchases for his business (which I really do not understand as I know nothing of that particular industry) then should I be doing more to ensure they are? Or, for tax purposes, if he assures me they are W&E for his business the onus is on him to prove this if he was inspected at any point?
I'm trying to make sure that I doing right.

MarkT

burg wrote: »

As for paying his wife who does not perform any duties then you need to warn him of the consequences. If she can perform some duties and be paid for them then this will get around it.

I know I may be a little green here, but what about her 'work' when getting the company off the ground? I've been in this position and my ex wife never got a penny out of my business for the short time it ran. However, she still helped a lot with admin in the early days - would that suffice in this scenario?

jamesm96

In an instance where a client is telling you an item is for business use, it's not really 'on your head'. Make sure the client is aware (in writing, ideally) that any private use should be disallowed and that failure to do so would result in penalties and extra tax... etc.

If the client is happy to sign the return which includes those expenses in the full knowledge of the risks (and, let's not forget, he may well be completely right!) then there's not much to worry about - it's the client who makes the declaration and it's the client who bears the legal responsibility for making a correct return of taxes, not the accountant.

Obviously if it were a more serious issue (like, 'I don't think I need to tell HMRC that I earn £50k a year selling smart-phone apps) then there'd be other ethical considerations like disengaging and reporting to HMRC, but that's a whole different ball-game.

deanshepherd

No problem as far as I can see. A limited company can spend it's money however it likes. There is no concept of private use for a company.

The only questions to ask are should any of these employee benefits be reported on a P11D and is the salary to the wife wholly and exclusively for the purposes of the trade.

wildgoose1uk

I agree with Dean. As long as the benefits are reported on a P11D and the salary to his wife treated appropriately then I see no issues.