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?

> 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.

Yes, you are being bumped out and stitched up

''@wishiwasjoking · Today 14:12
You were happy to get involved in their tax avoidance schemes when it benefited you. Now they want to do dodgy deals that undermine you you're trying to clap back.You reap what you sow.''

Exactly.

The moral of this story might be don't try to avoid inheritance tax and you can't trust people who are prepared to cheat the system not to ultimately end up taking advantage of you too.

Everyone involved sound like they value money and trying to avoid tax above everything else so I am not surprised this turned sour.

Letting the property is the business and you don't own the property. So you don't have a business without their premises.

Inheritance tax avoidance - rent paid needs to be market value or they’re still liable. If you live there they will check this.

Dodgy businesses and tax evasion aside, it sounds like your husband’s accountant was advising him and his children on their businesses and property, of which you happen to be a tenant (sort of). I don’t think client confidentiality has been broken per se, it’s simply that your business and personal relationships are very muddled and you happen to all use the same accountant, who has to advise everyone.

That said, your Dh may have just made all this up or misunderstood how things were explained (he’s obviously not a sharp entrepreneur judging by his failing business).

To me, it sounds like his children have perhaps realised that you are raking in income on their property while they are a bit being cheated out of an investment by their dad and someone is trying to regain control of the property. I think it would be different if you were a tenant running a business from their premises. But you are just renting out their property, there is no ‘business’ separate to that. That where it’s gotten all a bit cloudy waters.

Potential breach of client confidentiality by your accountant is frankly the least of your worries.

It’s good you have a meeting setup with your accountant to find out their view on the conversation.

But sounds very much like you need a new accountant and a new location to run your business from.

Do you live with your partner in their home? If so what are the arrangements re rent, money to improve the property? I’d be starting to look for somewhere else to live right now as well.

“But sounds very much like you need a new accountant and a new location to run your business from.”

But the annex that the children own and let to OP is the holiday let that OP lets out - that IS the business. Unless you think she can find a very kind landlord who is going to let out a property at a peppercorn rent, enabling her to make a profit?

OP needs to pay the children a market rent for the annex otherwise HMRC could get very interested and not in a good way. But that makes it hard to make a profit.

OP needs to pay the children a market rent for the annex otherwise HMRC could get very interested and not in a good way. But that makes it hard to make a profit.

Because its all a scam to divert funds and avoid tax

If they own the property then surely they were discussing their own rental income and the recent changes to Furnished Holiday Letting rather than discussing your business specifically?

If a property is let to a "connected person" then HMRC can expect the full market rate to be declared as income even if they are not receiving it. With all the new changes coming in with the tax laws, they may have been advised that they can no longer do the peppercorn rent thing.

It doesn't sound like a GDPR breach to me, unless they told them your profit and tax etc and things that are nothing to do with their side of it.

If they own the property then they need to declare the income as rental income.

You need to speak to your accountant yourself, to find out exactly what the law changes mean for you.

It sounds to me like they were trying to find a good work around so that you could still have an income from this, while adhering to all of the tax laws because at the end of the day, they are the property owners. You simply rent the property then sublet it as a FHL. That is a business that you can do from any property so they are not taking your business from you, you just have to find another property to rent out and would have to pay more to do so

Future tax planning could pay a large part in this, so that they are seen to be running the business themselves.

You need to calm down and speak to the accountant to clarify the situation.

That's different though.

In terms of residential rents they are income to the owners of the property. It my be that holiday let's also come under this same heading. Especially as the legislation for holiday letting income tax has changed significantly recently.

I thought she meant she ran a holiday letting agency business from.the.premises. Not that it was staying and paying guests in the property that were her income.

She should have been part of the discussion though - I suspect it was a small part of a larger tax advisory meeting and it just happened to have major changes discussed with the property owners.

You have described this in a way that I think is completely deliberately misleading.

The entire situation is fraudulent. Their accountant will be aware of the set up, not of how much money you take etc, but the fact that they are defrauding HMRC and will have advised them they need to take steps.

You aren’t running a business from their property, their property IS the business! Therefore the money needs to run through the business, as do the expenses.

Now this would be done in a tax efficient way (you could be paid reasonably for it and that would be legitimate business expense) but you cannot try to tell HMRC that someone just gives you use of a property to rent out and keep the money but this didn’t come about as an attempt to defraud HMRC in the first place. Because it very, very clearly did.

They have been warned by their accountant because when this is all unraveled it is THEM who will be liable for the unpaid tax, not you. This is not a GDPR breach, it’s them being told to get their tax affairs compliant and do so pronto!

The income from letting a property belongs to the owner(s) of that property. That’s why it needs to go into their bank account.

You are getting some good advice, but also a lot of very bad advice on this thread.

Far better to arrange to see an accountant yourself.

It's only if the accountant gives your partner information that he didn't already know, that there would be a breach.
This isn't true. They shouldn't be discussing any aspect of someone else's business with another unless you've given that person authority to discuss on your behalf, regardless of what they claim to already know.

Is your business, letting out that section of the property that on paper doesn't belong to you but belongs to your partners daughter?

If so then I can see it could be complicated as to whether any rent or income generated by the property actually belongs to them who own the property, rather than you who manage the lettings.

They would be liable for the tax on the rental income on their property.

If I've misunderstood and you use that part of the building as your office to run your business from - that's different.

Assuming I am right, and the holiday let you run is actually owned by them, the income from it is theirs and they are liable for the tax on it. Then it would make sense you get a fee for managing the lettings.

You can't have a business exploiting someone else's property.

And tbh it serves you right for putting it in their name and you/your partner thinking you can have it both ways.

You are not correct a property owner has a legal right to lease/rent a premises to anybody they choose.

The property owner has no automatic right to any income generated from the property.
Married people can own property in their sole name and enter into a commercial arrangement to lease the property to their spouse. The leasing spouse can also sub-let the property to a third party.

It can be normal in the hotel business to split the property and the hotel operation into two or more legal businesses (eg rooms, spa/leisure centre, golf club all being run as individual business which pays the property rent and service fees).

The OP can run a holiday let or any other type of business from the property.

The OPs business income and rental expenditure creates her personal tax liability.

The rental cost she pays over to her partner / partners children is his /their income and it is this income which creates a tax liability for them.

The accountants if paid to prepare the tax returns should be marking the rental cashflow as being a connected party transaction.
They should be establishing the open market value of the rental agreement. Then checking the specific legislation for the OP, the OP's partner and the children and making any necessary tax adjustment to the taxable income and calculating the tax due to HMRC.

The OP's partner / children may not be happy to pay any extra tax which is due.
But that is not a reason to claim they get to run the OPs business nor control the cashflow and keep profits over and above a MV lease.

Time to get a separate accountant

Sounds fraudulent. Run a mile from this idea and him.

Oh I missed this, thanks.

In this case although the OP regards her business as entirely separate to her partners business I can see why this distinction is less clear to her partner and potentially his daughter.

Oh come on. the OP knows that nobody leases a property to someone else for free so that they can lease it at a profit for someone else. It’s completely dodgy and very obviously ao

I agree, from the indignation over ‘her’ business being discussed and emphasis that she was the ‘proprietor’ it hadn’t occurred to me the OP’s business was letting out her partners/partners daughters property that she paid only a nominal rent for and that she wasn’t renting out any other holiday lets. I assumed she was using their property as an office to work from whilst she managed various holiday lets.
The actual situation is dodgy and I’m not surprised her partners accountant wants it ‘regularised’

But you’re renting the property now.
Rubbish about them having to pay your tax though.