Has client confidentiality been breached?

[EveryonesMother]

(Back info). I run a small holiday business from a rented property. I am sole proprietor. No employees although i do have hired help who invoice me.
My partner owns and runs a larger business with his son. They have approx 35 employees.
The property I run my business from is in my partners son and daughters name but is annexed to our home. This was done for inheritance tax avoidance. I pay them a peppercorn rent so all is legal.
We have the same accountant for both businesses, who is a personal friend of theirs.

My partner returned from an accountant meeting re his business and informed me they had discussed my business.
I was informed that due to new tax rules my landlord (S@D) is now responsible for paying my tax? (AS IF)
And that his D will set up an an account for my business income to be paid into. She will give me a CC/Cheque book to use, I will get a management fee and any monies left at year end after they have paid the tax.

In my mind this is practically taking my business away from me in all but name and I become an employee?

I am sat here thinking I am being stitched up for some reason. His business is going through a troubled patch, redundancies have been made etc.

Im pretty livid that it has been discussed and decisions made behind my back without consultation or authority.
Im sure there is a code of conduct for accountants and client confidentiality and this has been broken
I have arranged my own meeting with him eto discuss but AIBU?

Your partner is talking shit. One of my tenants is a childminder - her business is nothing to do with me, I've no responsibility for her tax.

There is something very dodgy going on.

Do you have a proper tenancy agreement?

This is serious LTB territory.

Oof. It looks like some form of money laundering, almost. Maybe there is a legal and rational reason for this, but I'd be very wary in your position. When you say the business premises are 'annexed to your home', do you mean that part of a home that you co-own with DP has been put in their names - ie, gifted to them? Or does the home belong to DH? If the former, I'd be very worried.

You are a limited buisness, and the only director? That's the beginning and end of it. The business pays the tax. Nothing to do with your revenue or tax is anything to do with anyone else and never can be unless you hand over shares to your DP's business, DP or DS.

I think you need to separately make an appointment to see the accountant.

On one level, I guess it looks as though you are making money renting out a property that someone else owns and you are only paying a peppercorn rent for, so I can see why they might have concluded that the taxes might have to be handled by the owners of the property and not by you.

And that his D will set up an an account for my business income to be paid into
She will give me a CC/Cheque book to use, I will get a management fee and any monies left at year end after they have paid the tax.

In my mind this is practically taking my business away from me in all but name and I become an employee?

There's so much wrong with this, I can't believe that anyone running their own business would just sit and accept it!

Don't you already have a bank account, cc etc

What are you meant to do for money month to month? Or is that the management fee?

What on earth did you say to him?

So basically your partner is trying to seize control of your business income to support his failing one?

Get independent advice. About the building rent, about the tax, about EVERYTHING. Don't agree to anything don't sign anything.

OP can you confirm that your business is letting out the property as a holiday let? That you don’t use it as a premises for a business activity? A few posters including Phase2 and Bramshott have come up with good explanations about what may be happening if the former is the case.

Is it something to do with the new IHT rules and reduced agricultural relief?

I don't know that it is but you mention farming and IHT and we all know those rules are changing.

The whole apparent takeover seems odd. Has it always been your own business?

Yes this

I would be looking into moving your business, and getting a new accountant. Definitely dodgy AF.

Why dont you ask your accountant to take you through the proposal? It is not your property so the FHL income should be taken by the owners. You can of course charge them an appropriate managment fee

OP would this be an accurate summary?

• your partners children own a property gifted to them which is annexed to/ is a former part of the marital home which you and your partner live in
• you pay the children a peppercorn rent for this annex/ property
• You then rent the property out, and pay tax on the income after your business expenses and using your personal allowance.

if that is the case I have to say I’m not surprised your husbands accountant is concerned that HMRC might take an interest. It’s not that your family are trying to take your business “off” you as such, rather the set up could look like somebody was trying to evade tax.

Im sure there is a code of conduct for accountants and client confidentiality and this has been broken
If the accountant belongs to a professional body it will have a code of conduct.
Your business as a sole trader would come under general business terms which normally prohibit your accountant from discussing your business dealings with others.
You have data protection rules as you are a sole trader.

Google Chinese walls it will explain how the accountancy business should have managed your business relationship.

Your problem is proof.

Im pretty livid that it has been discussed and decisions made behind my back without consultation or authority.
The lack of proof:

Its possible that your partner used a what if about his property.

If you were a stranger it makes sense to close off the lease recover his business asset and set up the same business with a employee of his doing your role.

I have arranged my own meeting with him eto discuss but AIBU?

You 100% need to get business advice from a independant source.

The accountant is a family friend of dP and may have actually discussed your sole trader business with dP.

But most important you dP is the more valuable client when it comes to the accountants own business.

There is a conflict of interest between your business and your landlords (dP) multiple businesses.

The accountant cant be giving you both good advice on how to stop the other party from achiving your aims as dP wants control of your business and so do you.

If you gave the meeting and the accountant fails to point out this obvious fact they are clearly failing to act in your best interest

Hang on… your business is the ‘holiday letting’ out of a property that doesn’t belong to you, and not only that, it doesn’t belong to your partner either?

In that case you definitely need an accountants advice, on the face of it it may look to HMRC like it is your partners children’s business, and there’s some kind of tax dodge going on.

I’m unsure about a breach of confidentiality, but it does sound like they want to steal your business.
a bakery that rents it premises is not going to pay all their income through their landlord it would look like money laundering at the very least.
please do seek independent advise.

OP - What exactly is your business? Do you pay your landlord (the son and daughter) a small rent and then effectively sub-let the annex as a holiday let to paying guests (or sub-let it as a business unit to another small business)? For example, you pay the "landlord" £100 a week and then sub-let the property for £500 a week, making a profit of £400 a week that you then pay income tax on?

On what basis does this agreement operate? Do you have a contract with the "landlord" and if so, what conditions are there - e.g. notice periods, who is responsible for repairs, who pays utilities etc?

It sounds like the accountant (or someone) is suggesting that your business - lets call it "EM Rentals" - should operate in the future on a different basis, and that the current arrangement might not be the best in terms of tax efficiency or inhertance tax planning.

Alternatively, the "landlord" now wants to control the business and keep a larger share of the profits for themselves. Perhaps your "landlord" wants to take over "EM Rentals" and collect the rent directly into their bank account and cover the operating costs and then pay you whatever surplus there may be. In effect you become an employee (presumably you would still actually do the work of finding tenants, sending invoices, handling queries, organising cleaning etc) but with no guaranteed income. The "landlord" could easily add all sorts of fees and costs into the operating overheads so that there is effectively no profit left for you to take as a wage - which is clearly not a viable option for you.

Questions:

What form does your business take - is it registered as a sole trader, limited company or ..?

Are you the owner/director of "EM Rentals" and do you own the business name, the website address and phone number, the customer list and the goodwill of the business? If so, what is all this worth?

Is there a contract between your business and the "landlord" - particularly around notice periods? Rather than just collecting the rent themselves (or having you pay it directly into an account that they control) is there a notice period? Who do the tenants have a contract with (presumably your business) and who will they pay (or who have they already paid) the rent to?

Does your business have any other activities apart from those linked to the annex - e.g managing other rental properties? If the "landlord" took over the rental of their annex, would that be the end of your business?

Whatever the answers are to these questions, you should be asking the accountant and/or the "landlord" to put in writing what they are proposing and why they are proposing it - and then take that document to a different solicitor or accountant for an independent opinion. On the face of it, it would appear that your business is being taken from you without your consent.

Sounds strange.
Council tax rules are changing on second properties & holiday lets, could your husband have confused that?

Absoutely this.

Add in finding somewhere else to run your business from (is there some sort of shared office space near you, where you can rent a desk or a room).

And a complaint to the accountants professional body.

But the “business” is renting out as a holiday let the premises that she rents from her partners children. Unless she can find another property that a landlord is prepared to let to her at a peppercorn rent….?

OP might be better phrased “I was informed that due to new tax rules my landlord (S@D) now have to declare the holiday let income themselves rather than me declare it, using my (unused?) personal allowance, and paying basic rate of tax”.

OK - putting conspiracy theories aside, perhaps @Daisydoesnt is correct and the accountant has flagged up that HMRC is not likely to accept the current arrangement continuing, or that changes to the tax laws mean that the arrangement is no longer the most sensible.

Even so it seems odd that you have not been involved in the conversation given that it is your business and that you have been responsible for its success.

Using my example above, if you are currently earning £400 a week for your efforts (marketing, booking, invoicing, organising cleaning etc) then what are your husband and the "landlord"/family proposing your salary should be under the new arrangement? The answer must surely be "no less than I currently earn" - so if they are proposing that you only receive the profit after expenses, how is your income protected? If you become an employee, how will they cover the cost of NI and other employers' responsibilities - or will you effectively be paying for these as the "profit" is reduced?

What about the value of the goodwill and other tangible assets - website, customer list, business name etc?

What happens if you agree to them taking over the business, but tell them that you are no longer going to be involved in the business on the terms they are offering? What would it cost them to find someone else to cover the work you do? You're presumably on-site 24/7 - who will cover these hours and at what cost?

It’s all an issue for tax purposes. The “gift” isn’t a gift because you are still in possession and are not paying market rent. As such may well fail re IHT avoidance. Then the children are letting your company use it for a peppercorn rent but you are then running a viable profit making business from it.

so your husband has “gifted” the property to avoid IHT (won’t work because he’s effectively retained possession” and then rented it at a loss to a company of which his spouse is the sole director..

Come on OP. You can see this can’t be right. The accountant has clearly told them they need to try to unpick this. I suspect by telling them they need to charge you market rent which they will then be taxed on

The handy thing is that everyone can see exactly what the market rent is. It’s the rent you’ve been taking…

Have you asked your accountant what the hell this is all about?