Contractor confusion

02 February 2006

Issue: 4043 / Categories: Forum & Feedback , IR35 , Business , Income Tax

I have a relatively new limited company client, which operates as a building subcontractor. Although the previous accountant advised that the business should trade via the format of a limited company, the directors did not open a company bank account and income payments and expenses were made into and from the director's personal bank account.

To complicate matters further the paying contractor has issued CIS vouchers in the director's personal name rather than in the company's name. These facts have come to light in the preparation of the first trading accounts.
Our question is whether we should prepare corporate accounts and treat the company director as acting as a 'nominee' for the company or should we prepare accounts for the director as a sole trader and put matters right from now on preparing — in due course — cessation accounts for the director and limited company accounts commencing from now?
Furthermore how do we present matters to HMRC to avoid problems? And — depending upon the approach recommended — could readers ensure that this is backed up by detailed reasoning should we have to explain matters to HMRC.
We look forward to Taxation readers' suggestions on exactly how...

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