Client advised to combine corporation tax with her self assessment- Cant be right!

My sole trader client set up a limited company in November 2012 (no word of this till now) and tells me Companies house advised her that because the profits will be so low she simply had to write to HMRC and add the companies accounts to her Sole Trader Accounts. The first glaring problem is that these are two separate entities. What happens to the Corporate Veil in this case? Of course I have told her I have never come across this advice and will talk to HMRC about it.
I don't even know how to go about it because in the first place she incorporated the company in November so the Companies year end is very far away from the 5th April of her Sole Trader Accounts.
Am I being a bit dense? Has anyone done this?



  • Antoinnette
    Antoinnette Registered Posts: 118 ? ? ?
    Actually it has just occurred to me that they may have advised her to leave it as a dormant company and prepare accounts as a sole trader as the profit was so little.
  • Bluewednesday
    Bluewednesday Registered Posts: 1,624
    I would still not accept that the advice is correct. If there has been trading activity through the limited company then it must appear on the accounts. I think you need to talk to her and find out more details, it could be that she's not properly traded through the limited?
  • Monsoon
    Monsoon FMAAT, AAT Licensed Accountant Posts: 4,071 ? ? ?
    "Companies house advised her that because the profits will be so low she simply had to write to HMRC and add the companies accounts to her Sole Trader Accounts"

    This doesn't sound like the kind of advice Companies House would give. Either the company has traded or it hasn't. If it has, it needs its own accounts and tax reference. If it hasn't and she's been trading as a sole trader then yes, this will be taxed on her as an individual. You can't just opt to put it through a sole trader "because the profit are low." That's just plain wrong.

    My gut feeling is that CoHo agreed with her the company is dormant and thus the income must have been sole trader (but I would have thought it unlikely they said the latter as CoHo don't, in my experience, give out any tax advice).
  • Antoinnette
    Antoinnette Registered Posts: 118 ? ? ?
    Thanks for replies :-) I have just heard from her again. Interesting how she dropped the bombshell and then went AWOL.
    Anyway.....she has sent me a copy of a letter she sent to HMRC last year informing them her company was dormant. She tells me this was based on advise from Companies House. HMRC have also told her the company is dormant until 2017.
    I have looked at her books and she happens to have sold £150 worth of her sole trader stock under the limited companies name; at least that's how she has recorded them. She has refused to account for stock the normal way as well, "she cant be bothered" I have been told. So she puts the costs in but doesn't do a stock count at the end of the year for a closing stock figure. I guess for this tax year with the cash accounting scheme it will not matter anyway but its been a bit of a brickwall for the last two years. I have never had contrary clients before and always imagined that if I did I would train them to do things properly. Ha the reality is different
Privacy Policy