For a number of our clients we manage (nearly) every aspect of their company accounts function. From raising sales invoices to credit control, managing the purchase ledger, payment of suppliers, payroll, VAT, annual/quarterly returns, management information and year-end accounts; we act as their outsourced accounts department.
Whilst we’re happy to act as a virtual accounts’ office, we always say to our clients that it’s fine to outsource all your accounts work but please don’t outsource your thinking. Keep an active understanding as to what is happening and remain aware of your obligations. There are two clear reasons why we say this:
- It’s your business and you need to understand the bigger picture. Yes we’re specialists and we can add knowledge and experience to the process, make it more efficient and remove the need for you to have in house accounts trained staff; but at the end of the day, it is your business. You need to know how it is performing, where the risks sit and whether it can continue to trade within the bounds of the law
- Even though we work for you and act in your best interests, the liability remains with you/the business (unless we act unscrupulously or without consent)
As if to underline the second reason, a recent tribunal between a company owner and HMRC has demonstrated the importance of knowing what’s going on – even if you choose to outsource.
Agent using wrong PAYE number leaves employer liable
In this case, the agent who processed the payroll continued to do so for a period of 18 months without changing the PAYE reference in the RTI (Real Time Information) submissions, despite the business (and employees) having been transferred to a new owner. Whilst a new PAYE reference was issued to cover the PAYE under the new business owner, the fact that it was not changed in the RTI submissions meant the original business owner was unaware that they were accruing a significant tax liability. Needless to say, the former business owner did not pay the liabilities and penalties for the 18 month period and when it became clear what had happened, appealed.
However, HMRC said that there were no grounds for appeal as the legislation makes clear that the payment obligation sits with the employer making the submissions, even if through an agent. The tribunal upheld this position meaning the original business owner remain liable until such time as the agent amends the RTI submissions.
Extreme but important example
Whilst this may seem like an extreme example of the point, it does help to highlight the importance of remaining in control and knowing exactly what is taking place on your behalf. In the case above, it is clear this was not necessarily happening and an assumption was made that once the transfer of the business had taken place, everything else, including the update of the PAYE reference would simply happen.
Sadly, this is not an isolated case and we do hear of similar situations from time to time, which is why we will always make the point to our clients when they speak to us about outsourcing their accounts.