Paying contractors

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Sevren
Sevren Registered Posts: 101 Dedicated contributor 🦉
in General accounting discussion
Hi, I am trying to find the right references to make a company understand that it is not a good idea to pay contractors into any other bank accounts other than to one which relates to the contractors invoice.

It is a cleaning company - there are in my mind IR35 issues - but I have been overruled by their accountant.

However, I now find that the contractors payments are being paid into family members bank accounts and even each others !

When querying it I have been told that some of them simply don't have bank accounts and have had to find people willing to receive payment for them.

I am only doing basic bookkeeping here and am being overruled as I say but I have looked through everything from money laundering to banking laws and am sure that I am missing something obvious and concise that I can prove my point with.

Unless of course I am wrong !

Thoughts would be welcomed

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  • ademoore
    ademoore Registered Posts: 146 Dedicated contributor 🦉
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    It says that there must be separation between business and personal transactions within the HMRC's "Self Assessment, a guide to keeping records". I think the main benefit in the long run is if the client comes under inspection. HMRC can ask to see whatever bank accounts have had any of the business funds paid into it - if these 'other' people are happy to open up their accounts, then so be it, but I do think it should be told to them. Most of my clients have separate accounts, purely in their own name, but those that don't, have been told.
  • PAMDILL
    PAMDILL Registered Posts: 721 Epic contributor 🐘
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    If they come under CIS (cleaning new builds) then there is definitely a rule somewhere in the regs that payments have to be made to the person named on the CIS records
  • Sevren
    Sevren Registered Posts: 101 Dedicated contributor 🦉
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    Many thanks for such timely replies.

    No new builds fortunately - the problem that I keep going back to is that whenever I raise these issues, I always end up by saying 'in the event of an inspection......'.

    To be honest I am still in the doghouse for keep banging on about not paying them in cash - it was me that said payment would be preferably paid directly into bank accounts as I was trying to protect the client by creating an audit trail - I didn't expect to go from the frying pan into the fire !!

    Thanks for your responses - I wondered if I was being too paranoid.

    (I've still got that VAT inspection from another post to keep me awake at night.)
  • JodieR
    JodieR Registered Posts: 1,002 Beyond epic contributor 🧙‍♂️
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    If you look on HMRC's website under 'Making payments to subcontractors' here:

    http://www.hmrc.gov.uk/cis/advice-con-pay.htm

    it does say that the subbie may authorise you to make payments to a third party. I know that this will most commonly be to a factoring company, but I would think that so long as you have the client's (preferably written) authority to make payment into someone elses account then you're on the right side of the law and I can't see why an inspector (inspecting your client's records) would have a problem with that. I agree that the subbie could have a hard time preparing his tax return and with any subsequent inspections, but that's not for you to worry about!

    I would just ask the subbies to write/print onto the bottom of each invoice 'please make payment to Mr X Account details xxxx'.

    Jodie
  • Sevren
    Sevren Registered Posts: 101 Dedicated contributor 🦉
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    Many thanks Jodie - this is a good idea.

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