Does AAT allow a limited company joint venture between two AAT licensed accountants?

David Ballantyne

Hello everyone,

I have been trying to get clarification from AAT Membership Support regarding what I thought was a fairly simple question.

I am seeking to start a practice soon. My experience is limited to bookkeeping, payroll, VAT, management accounts, budgeting and forecasting and final accounts. Therefore I am only likely to gain a licence which covers these areas. I have a friend who is AAT qualified, has his own practice and is licensed to offer business tax and corporation tax and other services that I don't have experience in.

In order to help my company offer a fuller range of services, my friend has offered to join as a director and/or shareholder. I thought that between the two of us my company could offer a fuller range of services within AAT rules. Additionally, my friend will supervise my own work as I develop my skills in business and corporation tax etc. Eventually, when I become professionally competent in business tax and corporation tax, my friend will end his involvement in my company.

My question to AAT Membership Support was:

In regard to the above planned arrangement to offer a fuller range of services, could you tell me if the following scenarios are acceptable to the AAT?:

1. I am a director holding 100% of the shares; my friend is a director with no shares.

2. I am a director holding 95% of the shares; my friend is a director with 5% of the shares.

3. I am a director holding 95% of the shares; my friend is not a director and holds 5% of the shares.

Could you also advise in regard to each scenario, what information the AAT needs in regard to each situation?

Unfortunately, the answer to my query did not help clarify the situation.

I would like to ask, does anybody else operate a joint venture limited company between themselves and another AAT licenced member.

Thank you in advance for your help.

David.

hal978

I have also recently contacted Professional Standards as their definition of self-employed accountancy services in the AAT Glossary does not cover different ways of holding shares.

Apologies for stating what you already know, but the AAT glossary defines self-employed accountancy services (for a limited company) as:

An associate member, full member or fellow member is providing self-employed accountancy services if they are providing accountancy services as ... a director of a limited company that provides accountancy or bookkeeping services and holds at least 5% of the shares* of the company...* shares belonging to anyone in the member’s household or family are treated as belonging to the member.

1. I am a director holding 100% of the shares; my friend is a director with no shares.
You would be deemed to offer self-employed accountancy services whereas your friend wouldn't.

2. I am a director holding 95% of the shares; my friend is a director with 5% of the shares.
You would both be deemed to offer self-employed accountancy services.

3. I am a director holding 95% of the shares; my friend is not a director and holds 5% of the shares.
You would be deemed to offer self-employed accountancy services whereas your friend wouldn't.

You could use a nominee shareholder to hold your shares, so long as that nominee is not a director and not involved in day-to-day running of the company.

I can send you details by private message if required.

David Ballantyne

Hi Hal,

Thank you very much indeed for your rapid response. It would seem that you have provided an accurate response to my question that the professional staff in membership support were unable to do.

So it seems that option 2 is the one I should implement to meet the requirements of the AAT.

Actually, I did not know about the definition of self-employed accountancy services in the AAT Glossary. In fact, I did not know of the AAT Glossary. It was co-incidental that I mentioned the above shareholding percentages!

Thank you for sending me the information about the nominee shareholder option. I am unclear as to what the benefit is, however, so I would be grateful if you could provide further information.

Once again, many thanks.

Kind regards,

David.

hal978

Hi David,

With the nominee shareholding option you beneficially own the shares without meeting AAT's definition of offering self-employed accountancy services (as advised by Professional Standards). By not meeting their definition, you could in theory provide the full range of services.

You will however be listed as the PSC owning 75% or more of the shares, as the PSC guidance says. I don't know if that is acceptable to AAT, but they should have mentioned it to me when I asked them.

A possible drawback about nominee shareholding is that the share certificates will be in the name of the company formation agent, although they will give you a signed share transfer form allowing you to transfer the shares at any time. It also costs a few hundred pounds per year. There are only 6 companies that I know of that are offering this service.

With your option 2, I think your friend needs to notify AAT of the new practice.

I also considered asking my employer to join me as a 96% shareholder, but I dropped the idea because he would be a Resposible Person for Money Laundering Purposes and the bank would also do a credit search on him even though he will not be a director or signatory.

David Ballantyne

Hi Hal,

From reading the AAT Glossary I think I understand your approach. Essentially, if you own less than 5% of the shares in the company, and an unrelated party owns the remainder, then you would not be required to be licensed by the AAT and could provide a full range of services.

So you have been seeking some means by which that could be achieved, hence the consideration of having a nominee shareholder. I guess that if there were a legal challenge to this, then the argument would be on the point of substance over form. Interesting lateral thinking.

Thanks for explaining.

David.

David Ballantyne

Hi,

Just an update on the above three scenarios that I queried with AAT Membership Support. Scenario 1 and 2 are acceptable to AAT. Didn't query scenario 3 any further, so don't know about that.

Regards,

David.

hal978

Thanks for the update.
It seems that if your friend is a director, it is acceptable to them, irrespective of how much shares he owns.

hal978

Just in case anyone is reading this thread, using a nominee shareholder will NOT work. AAT standards are aware of this and will still regard the individual as offering self-employed accountancy services. Also, no bank will accept opening a bank account.